As a general rule, filing bankruptcy effectively eliminates or “discharges” judgments, debts, tort liability and others types of general liability. According to Bankruptcy Laws, judgments for most types of general liability are dischargeable such as: general liability from adverse court rulings include suits based on loan defaults, non-payment of credit cards, tort liability, breach of contract, and many others. The general rule applies to Chapter 7, 11 and 13, although the discharge process is different in each chapter.
Bankruptcy essentially eliminates liability based on secured debts. Take for example, if you lose your family home through foreclosure, any remaining balance owed becomes a “deficiency balance”. A deficiency balance is contractual liability created by secured notes, deeds of trust, and other loan documents. These documents survive foreclosure and the terms are still enforceable as a contract even though you no longer possess the collateral.
However, not all debts are subject to discharge. The U.S. Bankruptcy Code carves out numerous exceptions. Some of the most common types of nondischargeable judgments include:
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Back taxes, accrued interest, government fines, penalties and punitive debts assessed by government authorities.
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Any debt that was not eliminated in a prior bankruptcy case filed under chapter 7.
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Debts resulting from credit card withdrawals for $750 or more, if the withdrawal occurred within 70 days of filing.
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Debts for purchases of luxury goods or luxury services for $500 or more, if the debt occurred during 90 days before filing.
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Debts created by accounts, credit cards, unsecured loans or installment credit if accepted during the 60 days before filing.
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Liability resulting from the commission of a crime, including fraud, theft, larceny, embezzlement, robbery. This ban applies at the time of discharge and is covers all debts incurred at any time without limitation, including all court ordered restitution.
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Debts for damages and personal injuries caused while a debtor drove under the influence of alcohol or controlled substances.
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Any debts assigned to a governmental authority for collection.
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Liability for malicious injuries, including assault, battery and vandalism.
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Other fines for violations of law, including all criminal fines and traffic tickets.
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All debts credit created fraud, deception, concealment or intentional false pretenses.
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Domestic support obligations such as child support and alimony