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Bankruptcy May Be Your Option

Which debts can be discharged in Chapter 7 – and which cannot?

If you are considering whether filing for bankruptcy is the best option for you, you are probably aware of the importance of the decision. Filing for bankruptcy can have good and bad consequences, but the balance between good and bad depends in large part on your specific circumstances and reasons for considering bankruptcy. Even the specific types of debt that you owe can be a significant factor in your decision.

This post is only a brief summary of some types of debts that may not be eligible for discharge, but it is not legal advice and these and other types of debt will often depend on your individual circumstances. A bankruptcy attorney could be a good source of legal advice to help Ohio residents struggling with debt to determine what their specific financial plan would be under Chapter 7 bankruptcy.

Most of the types of debt that are not dischargeable may be lumped into the category of "moral" obligations. The big picture includes debts that are not necessarily the result of the amount of consumer debt you have accumulated but rather debts that are owed under other circumstances. Some of these debts include:

  • Child support 
  • Alimony
  • Restitution due to others as a result of lawsuits or crimes
  • Debts incurred from an incident of driving while intoxicated 
  • Some federal, state and local taxes to be paid on money already earned

Obviously, a bankruptcy court will not let you off the hook from paying court-ordered child support or alimony because of other financial difficulties you are having. Similarly, debts ordered by a court to be paid to others as a result of your wrongdoing or bad decisions cannot be escaped through financial hardship.

Other types of non-dischargeable debts are associated with willful fraud or criminal activities. For example, debt incurred while trying to defraud the bankruptcy court just prior to filing such as buying expensive items which you might not be able to acquire after filing for bankruptcy. These types of transactions could also be used for dwindling down any financial reserves you have that might otherwise be included in the bankruptcy plan to pay creditors. Similarly, cash advances taken shortly after filing will raise a red flag.

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