Still More Debts You Can’t Discharge in Bankruptcy

What follows is the third and final blog post on debts that cannot be discharged in bankruptcy.  If any of these exceptions raise any issues at all please contact Phoenix Fresh Start Bankruptcy Attorneys. We would be happy to help you get some clarity with respect to what kind of discharge you can hope to get in bankruptcy.

Intentional Acts Causing Injury

What if someone has a claim against you for intentionally hurting them or their property?  The first question in determining whether the debt can be discharged is whether the injury was the result of both willful and malicious conduct.  

Willful conduct is purposeful conduct. Malicious has been defined as knowing that the act is likely to or will cause an injury or harm. The injury or harm does not need to be substantial or severe to meet the definition of malicious. So if you knew what you were doing, you did it on purpose and you knew it would probably cause injury or damage. 

Again, just knowing at the time that your action was likely to cause an injury has normally been deemed enough by the Arizona Bankruptcy Court. In essence, knowing what you were doing, doing it on purpose, and knowing that your act would probably cause some kind of damage means that the debt created by your act is non-dischargeable. 

Criminal Acts

Debts created as a result of larceny, embezzlement, and breach of a fiduciary duty are never dischargeable if there was a finding of criminal liability. But even in the absence of criminal liability, a discharge can still be denied under does not mean that However, the bankruptcy laws do address civil damages that can arise even if you are not charged with a crime, or if you are charged but are also facing civil lawsuits for the same behavior. 

Omitting Creditors

As noted previously, the bankruptcy code requires you to list every debt and each of your creditors. As much, many Phoenix area bankruptcy filers would like to leave out a family dentist or family friend/creditor that you really don’t want to notify, you just can’t select which creditors you list on your schedules.

Omitting a creditor can create issues later. How an unlisted creditor is treated under the bankruptcy code can hinge on whether the omission was an honest mistake or a deliberate act and whether you are in Chapter 7 or Chapter 13. In a Chapter 13 framework, after a certain date, you may have a difficult time adding a creditor that should have been included at filing. Even if you are able to add the creditor, you may have some explaining to do to the court.

If you omit a debt on purpose and the omission is later discovered, it raises an issue regarding the truthfulness of the signed declarations you signed prior to filing. This is not a place you want to be. 

If you remember a creditor after your Chapter 7 discharge what happens with the debt will depend on whether you had assets in your case to be distributed to your creditors. If no money was distributed to creditors, the debt will almost always be discharged at least in the Ninth Circuit where Phoenix is located. 

The reasoning is that if there was not anything to distribute in your bankruptcy to any creditor, the omitted creditor has not been harmed by not getting notice of the bankruptcy. This does not mean that the creditor cannot raise any of the objections to discharge that it would have been able to raise if it had been properly notified during your bankruptcy.  

Student Loans

Student loans are generally not going to receive any kind of discharge in your bankruptcy unless you are somehow able to show the court that you deserve a hardship discharge.  In order to get a hardship discharge, you will need to show the court that you meet all of the following three requirements: 

First, you need to show the court that if you were forced to repay the student loans, you would be unable to afford a minimal standard of living. Second, you would need to show that your current financial state had some permanence: The court would need to be convinced that your current financial state was going to continue for a significant period of time. Finally, you would have to show the court that you made a real effort to repay the loans for at least a five year period prior to filing bankruptcy. 

One other obstacle to obtaining a student loan discharge looms large. Getting a student loan discharged is normally a fairly expensive process. Student loans are never simply discharged in bankruptcy. An adversary proceeding must be filed within the bankruptcy itself to have the student loan discharged. Most attorneys charge roughly $5000 to take on even a simple student loan adversary. Of course, with student loans often running into the tens of thousands of dollars, the attorney fees for filing an adversary could be money extremely well spent. 

Call Us if You Have Questions

If you have any questions about any debt that you would like to discharge, please do not hesitate to contact the offices of Phoenix Fresh Start Bankruptcy Attorneys. We are happy to help you drill down on the full extent of what you can hope to discharge and the steps required for making it happen.