Bankruptcy law starts with the idea that all debts can be wiped out in bankruptcy, and then lists the exceptions to discharge.
Nineteen kinds of debts survive a bankruptcy case. They’re listed in §523.
The most commonly encountered nondischargeable debts are
- recent taxes,
- family support,
- student loans,
- drunk driving judgments and
- HOA dues that come due after filing.
If you are a creditor with a claim in one of those categories, you don’t have to do anything to assure the survival of your claim.
Non dischargeable if….
Three kinds of debts might be non dischargeable if the creditor files a timely challenge to the discharge of the debt.
The creditor must thereafter prove the debtor’s bad acts that make the claim non dischargeable:
- debts incurred by fraud, misrepresentation or false pretenses
- debts for breach of fiduciary duty, embezzlement, or larceny
- debts for a willful and malicious injury to person or property.
Creditors whose claim falls in one of these categories have to file an adversary proceeding in the bankruptcy case, typically within 60 days of the first meeting of creditors.
Creditors: Read more about whether to oppose the discharge of your claim
A challenge to the dischargeability of one debt doesn’t prevent the debtor from getting a discharge as to the balance of his debts.
Also, a discharge eliminates the personal liability of the debtor but does not alter the validity of any liens on the debtor’s property. Liens can only be changed or voided by an order of the bankruptcy court.
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