No one decides on bankruptcy because of one over-due bill. Instead, most people are behind on numerous debts, including their mortgage or rent, auto loan, credit cards, student loans, taxes, and in some cases, restitution, criminal fines, and court fees.
You must understand what is and is not dischargeable in bankruptcy, especially if you’re weighed down by certain fines based on a past criminal conviction. While bankruptcy may still be a good fit, you may still have some debts when it’s over. It’s best to go into the bankruptcy process with your eyes open.
What ‘Discharge’ in Bankruptcy Means
A discharge in bankruptcy means the court permanently releases you from a particular debt. You’re no longer responsible for paying it. It goes away, and the creditor can’t come after you anymore.
Discharge is specific to your debts – it isn’t all-encompassing. A bankruptcy court may discharge certain debts and not others.
Is a Bankruptcy Discharge Automatic?
Unless a creditor objects to a discharge, then yes, it’s often automatic. For example, courts usually grant a discharge in Chapter 7 when the time limit to file an objection runs out. That’s usually about four months after you file.
Chapter 13 and other chapters require you to go through a payment plan for 3 or 5 years. Once you complete your plan, the court grants a discharge if you’re eligible. Discharge is a bit more complicated under a Chapter 13 bankruptcy, so it’s important to talk with a lawyer about what to expect.
Can the Bankruptcy Court Discharge Criminal Fines?
Something you won’t get discharged is a criminal fine. If you were found or pleaded guilty to a crime, you may owe restitution, fines, and court costs. You’ll owe these debts whether or not you complete your bankruptcy case.
However, not all fines are from a criminal case. It’s important to distinguish between fines that are from civil action by a municipality or state and those from the criminal court process. Civil fines and fees may be dischargeable.
If you aren’t sure whether the fines you owe are a civil or criminal matter, talk with a bankruptcy lawyer.
Which Debts Can the Court Discharge?
The bankruptcy court can discharge all sorts of unsecured, non-priority debts. Those usually include medical bills, credit cards, utility bills, rent, and personal loans without collateral.
However, a bankruptcy court won’t usually discharge:
- Taxes
- Debts not listed by the debtor in court documents
- Child support, spousal support, and alimony
- Debts for willful and malicious injuries to person or property
- Debts to governmental units for fines and penalties
- Federal loans and student loans
- Debts for personal injury caused by drunk driving
- Debts owed to specific tax-advantaged retirement plans
- Specific condominium or cooperative housing fees
However, the dischargeable debts depend on the bankruptcy chapter. It’s different for Chapter 7 and Chapter 13 bankruptcies. You can discharge debts after completing a Chapter 13 repayment plan that you can’t discharge under Chapter 7. For example, the non-criminal fines you owe the government can be discharged in Chapter 13 but not in Chapter 7.
Ready to Learn More About Bankruptcy?
There’s nothing easy about deciding to file for bankruptcy. It’s a serious financial matter that can impact your credit and opportunities for years to come. But it’s also a necessary process that allows many individuals and families to start fresh.
If you’re past due on several debts with no hope of catching up, talk with our Cleveland Bankruptcy Attorneys at Cleveland Bankruptcy Attorneys. We have years of experience helping individuals decide whether to file and guiding those who choose to through the process.
You can reach us at (216) 586-6600 or email us at advice@clevelandbankruptcyattorney.com.