Bankruptcy helps the debtor in North Carolina who foresees no way of paying it. Chapter 7 bankruptcy requires the debtor to sell some assets to pay a portion of the debts. At the end of the case, this person gets a discharge, which relieves him or her of remaining debt. However, not all debts can be removed with bankruptcy.
Debts that are often non-dischargeable
A non-dischargeable debt cannot be removed in bankruptcy, and the debtor still has to pay the bills. Congress made these debts non-dischargeable because of public policy, and this kind of debt can fall under 19 categories. These debts may include child support, alimony, student loans, HOA and condo fees, debts that accrued from retirement loans, and current taxes.
Debts or court fines arising from malicious intent, embezzlement, larceny, or personal injury cannot be discharged. Debts not listed will not be considered for discharge.
Creditors can challenge dischargeable debt
Dischargeable debt refers to debts without collateral, such as medical bills and credit cards. A creditor can also make a challenge to the removal of the debt in many circumstances.
For example, if the debtor purchased luxury items worth more than $725 within 90 days of the filing, the creditor could claim fraud. A creditor may also challenge cash advances of $1,000 or more taken out 70 days prior to filing or debts from false pretenses such as falsifying income. The creditor has to present proof that the debtor purchased luxury items.
Student loans
New legislation may help make discharging student loans easier. While loans can currently be discharged, it takes an extra step called an adversary proceeding. Whether or not the loans get discharged depends on if the debtor meets the criteria.
They usually have to prove that paying the debt will force them below minimal living standards. The court decides to discharge the debt, not discharge it, or forgive a portion of it.
A debtor shouldn’t presume a debt can be discharged when filing bankruptcy. Making errors often gets cases dismissed, so an attorney may be able to help debtors avoid this.
