Many people think bankruptcy wipes out every debt. However, in New York and across the United States, the law does not erase every bill. Some debts never go away. These are called non-dischargeable debts and they stay even after the case ends.
Why some debts survive bankruptcy
Bankruptcy can resolve many serious financial problems. This includes credit card bills and medical debt. When a court discharges a debt, creditors must stop trying to collect it.
However, not all debts work this way. The law protects essential rights, such as the right to support children. The law also punishes harmful conduct, such as fraud. Because of this, some debts remain even after bankruptcy ends.
What kinds of debts usually stay
Although bankruptcy provides relief, some debts remain no matter what. Learning which debts remain allows people to plan ahead. These are the most common debts bankruptcy does not erase:
- Child support and alimony: People must continue making payments that support children or a former spouse.
- Student loans: Borrowers must prove “undue hardship” in a separate court case to have them erased.
- Debts from drunk driving: Drivers who hurt or kill someone while intoxicated must still pay damages.
- Fines and criminal restitution: People must pay court penalties and payments to victims because these debts punish harmful behavior.
Federal law controls bankruptcy cases in New York, so these rules apply in every court. When people know what debts stay, they can make better financial choices.
Debts that require a creditor’s lawsuit
Some debts only stay if a creditor takes extra action. The creditor must file a special case in the bankruptcy court. This is called an adversary proceeding. If the creditor wins, the debt stays.
These debts often include:
- Debts from fraud or intentional harm: People who lie or cause injury on purpose must still repay those debts.
- Recent tax debts: Tax agencies can collect certain recent income taxes if they follow strict time rules.
After bankruptcy, people should understand which debts remain so they can plan for them. Being prepared helps them move forward with more confidence.
A gentle reminder about getting help
Filing for bankruptcy is a significant step in taking control of one’s finances. A knowledgeable attorney can help explain how the rules apply to a person’s specific debts. With steady and understanding help, someone can take the following steps with more ease and confidence.
