There Are Some Debts That a St Louis Bankruptcy Will Not Discharge

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Regardless of which chapter of bankruptcy you file in St Louis Missouri, there are certain debts that the court will not discharge.  Generally speaking, those debts are as follows:  1) back child support;  2) recent tax debt;  3) student loans;  4) debts that were incurred through fraud;  and 5) debts that were incurred close in time with the filing date of your bankruptcy.  With very few exceptions, you can expect these debts to remain a part of your credit report and / or credit history.  

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The types of debts that you can in fact expect to discharged (especially in something like a St Louis Chapter 7 bankruptcy) would be unsecured in nature.  This would include things like:  credit cards, medical bills, payday loans, old gym memberships, utility bills, cell phone bills, overdrawn bank accounts, etc.  This in turn will give you a fantastic opportunity to greatly improve your credit rating.  Indeed, within about a year about filing your case, you can reasonably expect your score to rise by about one hundred (100) points.  And then eighteen to twenty-four months after filing, you will see your credit score get back to where you want it to be.  So certainly not overnight.  But way sooner than what most people think.

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So why are the above-named debts non-dischargeable?  Let’s go through them one-by-one.  To begin with, I think everyone can agree why child support should not be discharged through a bankruptcy.  The whole purpose of such a thing is for the betterment of a child’s life (so that he or she might develop more fully, as if both parents were present in the home).  So if you have fallen behind on a court-ordered Domestic Support Obligation (such as child or spousal support), then you will have to make arrangements to get caught up (either through a wage deduction, a repayment plan, or the interception of some other form of income (like a tax refund)).  If you end up filing a St Louis Chapter 13 bankruptcy, this could prove to be beneficial, because back child support is one of the primary debts that receives priority when a repayment plan is constructed.  

When it comes to tax debt, things can get a little tricky.  Why?  Because there are a few loopholes in the law that make it a little easier for some tax debts to be discharged.  It is true, the general rule regarding taxes is that the court will not knock them out when you file a St Louis bankruptcy.  However, if you owe an outstanding tax, there may be a chance to have that debt discharged if the year for which you owe:  1) is three years or older;  2) the return was filed with the government at least two years ago;  3) and there are no outstanding audits (or if any audits have been performed, then the appropriate timeframe must have first passed after the audit was closed).  If your particular tax debt meets these criteria, then we would be in a good position to get that debt knocked out.  

If there is one debt that almost everyone realizes will never be subject to discharge in a St Louis bankruptcy, it is good ole student loans!!  These debts will quite literally stick with you like luggage over the course of your lifetime.  Sometimes student loans are issued by the state in which you live, but more often than not, it is the federal government that provides this type of assistance.  And when the contracts are all signed, you will notice that there is very stringent language making it clear that you will be paying this money back in one way or another.  It is true that in some very unique set of circumstances, the government will forgive a portion (if not all) of your student loans, but this would require some pretty significant public service on your part (which most Americans are thoroughly opposed to).  Indeed, the only way to rid yourself of a student loan debt via a St Louis bankruptcy would be to file what is called an Adversary Proceeding (which is in effect a separate lawsuit filed against a specific creditor that seeks relief that the bankruptcy court would not normally offer).  So in reality, the best bet when it comes to student loans and bankruptcy is to set up an income-based repayment plan with the government (in which your economic standing is taken into consideration in regards to your ability to pay).

The Bankruptcy Code also makes it clear that you cannot have debts discharged that you incurred by way of fraud.  Common examples of fraudulent behavior would be taking out a credit card while knowingly using another person’s personal information (like using a Social Security number that does not belong to you);  using false information when applying for a line of credit (like making up sources of income that you do not actually have);  or any action on your part that was knowingly and/or willfully committed in pursuit of a fraudulent financial goal.  Not only will these debts not be discharged by the court;  but there is a very high likelihood that your case will be turned over to the local US Attorney’s Office for possible prosecution.  

And finally, a common debt that you cannot expect to be discharged would be any debt that you incurred just before filing a St Louis bankruptcy.  Specifically, the period of time that is most heavily scrutinized would be the three-month period prior to the date of filing.  So for instance, let’s say you have a Best Buy credit card.  Right before filing your bankruptcy (like 30 days before), you make a trip to this good ole American brick-and-mortar, and in one single transaction, you charge up $2,000 worth of goods on your card.  And then you turn around and file a Missouri bankruptcy thirty days later.  In this kind of situation, this creditor is going to file an Adversary Proceeding against you.  The basis for the Adversary will be pretty straightforward:  you took out a large debt just before filing, and you did not even try to pay any of it back;  therefore, a presumption of fraud must be found, and this particular debt deemed non-dischargeable.  Of course, the best way to beat back a presumption of fraud is to make about three or four minimum monthly payments on the debt (so as to establish a Good Faith Effort on your part).  

There are far more intricate discussions to be had about the law of bankruptcy (in regards to car notes, older tax debt, and mortgage arrearage).  And those areas will be discussed in future articles.  But for the purposes of this narrow topic, you should now have a much better understanding of when, how, and why certain debts will not be knocked out by the bankruptcy court.  All you have to do in order to start the process is to give us a call!!  We will answer all your questions, describe your full range of options, and get your back on the road towards financial recovery!  We look forward to hearing from you!!  

At Brinkman & Alter, LLC, we want to make sure that you receive the very best bankruptcy services in all of the St Louis Missouri area.  Our team will get you back on your feet, help to dramatically improve your financial standing, and put you in the best position possible for the future.  The attorney fees for a standard St Louis MO Chapter 7 are $675, and the upfront fees for a St Louis MO Chapter 13 are $300.  But the initial consultation is free of charge!!

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