Debts Not Affected

Often, people think that by filing for bankruptcy they will be relieved of all their debts. This, however, simply isn't true. Some debts are not affected by bankruptcy.

Types of Bankruptcy

The debts that bankruptcy affects will depend on the type of bankruptcy for which a person files. Here''s some basic information on the types of bankruptcy:

• Chapter 7: Chapter 7 governs the process of liquidation under the U.S. bankruptcy laws. In Chapter 7 bankruptcy, the person who files for bankruptcy turns over all of his non-exempt property to a trustee, who converts the property into money. This money is then distributed to creditors.In many cases, people who file for Chapter 7 have no assets to turn over and, therefore, lose nothing after filing for Chapter 7. In these cases, people''s debts are simply discharged, or forgiven.Chapter 7 is the most common form of bankruptcy in the United States.
• Chapter 11: Chapter 11 bankruptcy allows any business, whether organized as a corporation or sole proprietorship, or individual with unsecured debts of at least $336,900 or secured debts of at least $1,010,650, to reorganize their debts. This type of bankruptcy is most often used by corporate entities.
• Chapter 12: Chapter 12 bankruptcy is available only to family farmers or family fishermen. It allows these individuals to establish a plan to repay either all or part of their debts.
• Chapter 13: Chapter 13 bankruptcy allows people to pay off their debts over a period of three to five years. People who would lose property if they filed Chapter 7 bankruptcy are often drawn to Chapter 13 bankruptcy. People who have a steady income and whose income can cover both reasonable expenses and the debt are good candidates for Chapter 13 bankruptcy.

The debts that a person will be legally required to repay will vary from one bankruptcy to another.

Debts Not Discharged

There are 19 categories of debt that are not discharged, or forgiven, under bankruptcy chapters 7, 11 and 12. Chapter 13 bankruptcy has a more limited set of exceptions. The most common debts not affected by bankruptcy include the following:

• certain types of tax claims
• child support debts
• debts associated with certain condominium and cooperative housing fees
• debts associated with willful and malicious injuries to people or properties
• debts for most government-funded or guaranteed educational loans or benefit overpayments
• debts not set forth on the lists and schedules the debtor files with the court
• debts owed to certain tax-advantaged retirement plans
• debts the debtor incurred from driving while intoxicated and causing personal injury
• debts to governmental units for penalties and/or fines
• spousal support or alimony debts.

People who file for Chapter 13 bankruptcy may be able to discharge debts from willful and/or malicious injury to property. They may also be also to discharge debts incurred from divorce property settlements.