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What Bankruptcy Filers Need To Know About Nondischargeable Debts

Posted By admin || 5-Sep-2011

What Bankruptcy Filers Need To Know About Nondischargeable Debts

What Are Nondischargeable Debts?

Nondischargeable debt in bankruptcy is a class of debt which cannot receive a bankruptcy discharge. Child support, student loans , alimony, taxes and debt incurred because of criminal activity may be considered nondischargeable by bankruptcy court. While most bankruptcy debtors are aware of the difficulty in discharging student loans and other debts, debts incurred because of criminal behavior are often misunderstood.

So let's take a look at the challenges in handling debts incurred because of criminal behavior:

Bounced Checks

The bounced check is usually something most debtors don't' view as criminal. A bounced check is most often a simple mistake on the part of an overwhelmed and financially overextended debtor. However, the law considers a bounced check a crime. Because of its criminal status, a bounced check is considered nondischargeable in bankruptcy.

A debtor filing Chapter 13 bankruptcy may repay the bounced check and other nondischargeable debts over time; but they cannot give their bounced checks priority over other unsecured creditors. For example, while a debtor's mortgage and car note will enjoy secured debt status in bankruptcy, bounced checks are still considered nondischargeable but unsecured debt. In other words there is nothing tangible attached to the debt.

Because of their status as unsecured debt, bounced checks are paid after priority and secured debt such as taxes, child support and a mortgage. Because of its lower status there is a possibility that the debtor won't be able to repay the bounced check in full during the course of their bankruptcy. If this is the case, the debt will survive the bankruptcy case.

Categories: Bankruptcy
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