When you hear the term, “nondischargeable debt”, you likely think of the financial stress that comes with owing money, and there’s no way out of it. Put simply, nondischargeable debt is debt that cannot be discharged, or cleared of, in a bankruptcy proceeding. That means that you are still responsible for the debt even after filing for bankruptcy. Here, we will look at what types of debt are usually nondischargeable, as well as some situations in which debt can be declared nondischargeable.
Types of Nondischargeable Debt
In general, debts associated with certain types of taxes are nondischargeable. These includes income taxes, payroll taxes, estate taxes, and gift taxes. Debts incurred through fraud and malicious actions will likely remain nondischargeable in a bankruptcy proceeding. Additionally, any student loan debt or obligations made in a divorce settlement are usually nondischargeable.
When Is Debt Declared Nondischargeable?
When a debtor incurs debt fraudulently or maliciously, the creditor can petition the bankruptcy court to declare that debt nondischargeable. This usually occurs when the creditor can prove that the debtor intended to use the debt to commit fraud or cause harm. For example, if a debtor takes out a credit card or loan with no intention of ever paying it back, then a creditor can petition the bankruptcy court to make that debt nondischargeable.
Summary
Oftentimes, when individuals consider filing for bankruptcy, they want to make sure they understand what they owe and how it is treated. Nondischargeable debt is debt that cannot be discharged, or cleared, in a bankruptcy proceeding. This includes taxes, fraudulently incurred debt, student loans, and debts associated with divorce settlements. Additionally, a creditor can petition a court to have certain debt declared nondischargeable in certain cases, such as when a debtor has fraudulently or maliciously incurred the debt.