A fourth category of debt responsibility which is not wiped out in a Chapter 7 or 11 bankruptcy is fraud in a fiduciary capacity, larceny or embezzlement. An example of this type of non-dis-chargeable activity would be an Escrow Agent, or one who holds property in trust, who then uses that property to finance a trip to Europe instead of its intended purpose. Suffice it to say this type of debt would not be discharged in bankruptcy. A fifth category of debt which is not wiped out by bankruptcy is Alimony/Maintenance/ Support or Child Support. Property settlements may be discharged under certain circumstances, but alimony or support is never dis-chargeable.
The sixth form of non-dis-chargeable debt is willful or malicious injury or damage to persons or property, such as when you take a crow bar and break your neighbor’s kneecaps or their car’s windshield. Other types of intentional conduct may also not be discharged in bankruptcy. Guaranteed Student Loans are only dis-chargeable in bankruptcy if they constitute an undue hardship. An undue hardship has been interpreted as not only being a debt that you cannot pay back now, but one you will never be able to pay back. Accordingly, this is a standard that is incredibly difficult to meet. A seventh form of non-dis-chargeable debt are fines imposed by state agencies (ex. polluting) or by criminal Courts for restitution. A similar type of non-dis-chargeable debts are fines or restitution from drunk driving convictions and/drug abuse offenses.
Another type of non-dis-chargeable debt is a debt which could have been discharged in a prior Chapter 7 bankruptcy, but for one of these reasons was not. Funding commitments of officers, directors or shareholders of failed saving & loans institutions or banks are not discharged in bankruptcy. Condominium association or homeowner’s dues or assessments for property you continue to live in after you file bankruptcy will continue to be your responsibility. All the rest of your credit card, medical bills or unsecured debt will be wiped out completely.
We will discuss more common bankruptcy issues in our next few articles, so make sure to come back for more!
By: Joel S. Treuhaft, Esquire