Which Debts Are Not Discharged in Bankruptcy

Bankruptcy law book and a gavel

Bankruptcy is a powerful tool for financial rehabilitation. It stops creditors from continuing collection efforts immediately upon the filing of a bankruptcy petition. It prevents the later collection of debts by those same creditors after a discharge of those debts has been ordered. It applies exemptions built into the bankruptcy code to protect property of debtors from seizure or loss during or after bankruptcy. But, as with all things, there are limits to what can be obtained from filing bankruptcy. For instance, even though the law requires that all debts owed be included in a filed bankruptcy petition, not all debts can be discharged. Some will survive bankruptcy and will need to be paid or otherwise dealt with afterward. The list of such debts includes most student loans, court orders for restitution for crimes, child and marital support obligations, and some—but not all—tax debts. The kinds of tax debts which typically are non-dischargeable (that is, protected and will survive bankruptcy) are recent income taxes (due within three years before the bankruptcy filing date) and trust-fund type taxes (such as sales taxes or withheld income taxes of employees).

If a bankruptcy includes such non-dischargeable taxes, it is important to make contact with the taxing authorities post-discharge to make payment arrangements. The alternative (not recommended) would be to do nothing and wait for the IRS or Division of Taxation to proceed with enforced collection efforts such as bank levy or wage execution, which might only occur years later when they are least expected or most disruptive. The better course would be to retain competent counsel for representation before the taxing authorities to resolve any remaining unpaid taxes.

Contact Bruce H. Williams, Esquire

We have more than 40 years of experience helping people in New Jersey with bankruptcy law and tax matters. Contact us by e-mail or call us 856-795-0800 to arrange a private meeting. There is no cost or obligation for your first visit.

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