Even if filing bankruptcy is a good decision for a debtor based upon his or her situation, the debtor should be aware that there are some debts, even with a Chapter 7 bankruptcy, that cannot be gotten rid of. "Getting rid of a debt" in bankruptcy is known as "discharging a debt."
The following debts cannot be discharged in bankruptcy:
--Most taxes. Taxes may not be discharged unless they meet the following five requirements: (1) if they are personal income or excise taxes, (2) if they are more than three years old, (3) if they were assessed more than 240 days prior to bankruptcy, (4) if the tax returns were filed at least two years prior to bankruptcy, and, (5) the tax returns were nonfraudulent and there was no willful tax evasion by the debtor. In addition, in order to make the taxes truly wiped out (and not merely technically discharged) the tax claims must be unsecured.
--Debts for money, property, services or an extension of credit to the extent that they were obtained by false pretense, representation, or actual fraud; or, by use of a materially false financial statement.
The Ninth Circuit court (which includes Hawaii) has a five part test to determine whether a debt is non-dischargeable for misrepresentation or fraud:
1) The debtor made the misrepresentation;
2) That at the time he knew it was false;
3) That he made it with the intent and purpose of deceiving the creditor;
4) That the creditor relied on such representations; and,
5) That the creditor sustained the alleged loss and damage as the proximate result of the representations having been made.
In one Hawaii bankruptcy case, the Bankruptcy Court held that a debtor could not discharge a debt where, at the time the debtor borrowed $5,000.00, she knew that she had no income and could not repay her debts. Silence or concealment of a material fact may also constitute false pretense.
--Debts which are not scheduled by the debtor, unless the creditor has actual knowledge of the bankruptcy case.
--Debts for fraud by a person acting in a fiduciary capacity or embezzlement or larceny.
--Debts owed to a spouse, former spouse or child for alimony or support in connection with a separation agreement, divorce decree or property settlement agreement.
--Debts for "willful and malicious" injury to another or property of another. Willful means "deliberate or intentional."
--Debts for a fine, penalty or forfeiture. For example, restitution orders imposed in criminal cases are non-dischargeable.
--Student loans are generally non-dischargeable within the first seven years after they become due unless the denial of the discharge would be an undue hardship on the debtor.
--Debts for judgment against the debtor for death or personal injury caused by the debtor's operation of a motor vehicle while intoxicated; and,
--Debts from a previous bankruptcy in which a discharge was denied.
Of course, the information in this article is general only. If you have more questions, I suggest you consult an attorney that practices bankruptcy.
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