Many Tennessee residents who are struggling financially choose Chapter 13 bankruptcy because they want to make a good-faith effort to pay off debts. While Chapter 13 bankruptcy offers the ability to make manageable payments on credit card debt, it's not a magic solution. Bankruptcy does not eliminate all kinds of debt, and there are certain financial obligations that cannot be erased in Chapter 13. Read on to find out what types of debts will remain.
When a person files for Chapter 13, child support and alimony obligations do not end. If you have any unpaid amounts in these areas, they will continue to be owed. A Chapter 13 bankruptcy may temporarily halt collection activity for the previously unpaid balance, but if the person continues to fail to pay any spousal or child support, then the bankruptcy could be dismissed.
Student loans are typically not eligible to be discharged in a Chapter 13 bankruptcy, but there is one exception: a hardship discharge. You would have to demonstrate the inability to pay off the loan at the time of the bankruptcy as well as in the future. Eligibility is determined by three factors: good faith, income and duration of the financial circumstances.
In addition, any criminal fines and restitution are not paid off in bankruptcy. So if you are ordered to pay fines or penalties from a criminal conviction such as drunk driving, failure to pay taxes or a misdemeanor, then you must still pay them, as they won't be discharged.
There are misconceptions that bankruptcy gets rid of all debt, but that is simply not true. Fortunately, many kinds of unsecured debts are subject to the bankruptcy process. Bankruptcy may be an option for you if you need a fresh financial start.
Source: FindLaw, "Debts that Remain After a Chapter 13 Discharge," accessed on Jan. 11, 2015