Although an extreme course of action—and typically a last resort for many individuals and business owners—bankruptcy offers a plethora of advantages when it comes to essentially wiping the financial slate clean. Bankruptcy can release you from a multitude of debt liabilities and give you a chance to start over, but it comes with a steep price tag: Your credit. If you are filing for bankruptcy, chances are good that your credit is not great to begin with. However, the moment you actually file, you can kiss any remaining good credit goodbye for up to a decade.
Despite the detrimental hit to your credit, bankruptcy can, in many cases, be more helpful than harmful, depending on your circumstances. Each case is different and the decision to file should be thoroughly considered beforehand. Another factor every individual and business owner should be aware of before filing is the subject of debts that cannot and will not be discharged. You will still be responsible for the following five debts, regardless of your bankruptcy status:
1. Alimony - If you owe money to a spouse or former spouse, you will not be able to have those debts discharged. It is important to note that any attorney fees incurred in order to establish spousal support or alimony are also not dischargeable in bankruptcy.
2. Child Support - Similar to alimony, child support is a debt for which you will remain responsible, regardless of whether or not you go bankrupt. Child support and alimony are termed “domestic support obligations,” deeming them non-negotiable debts.
3. Student Loans - In general, nearly all student loans are non-dischargeable. While some discharge requests are approved under bankruptcy circumstances, it is typically very rare—you must prove to the court you are unable to pay due to “undue hardship.” Proving undue hardship can be extremely challenging. Therefore, be aware that you will likely still be stuck paying for any student loans you accumulated prior to bankruptcy.
4. Taxes - There are a number of tax debts that you cannot ditch even when you go bankrupt. For example, income taxes that are less than three years old from the time they became due cannot be discharged. Another example of taxes you cannot get rid of are trust fund taxes, regardless of when they were incurred.
5. Government Fines and Penalties - If you have any court fines or fines due to violating governmental statutes or regulations, you can expect to remain liable for these debts even after your bankruptcy is official.
If you are concerned about your responsibility for these lingering debts as you prepare to file for bankruptcy, speak with a competent Cook County tax law attorney today who can answer your questions and arm you with the information you need to protect your rights and financial well being. Call the Law Offices of Eric G. Zelazny at 708-888-2299 for a personal consultation.