As we have previously observed, it is relatively easy for Illinois residents to find themselves in situations in which they will have a hard time paying off their debts. Medical bills, unemployment, business failures and the like can create circumstances in which it may seem impossible to continue to afford to pay one’s creditors. For people in this position, filing for bankruptcy might be an answer, as it could allow them to discharge their major debts without completely paying them, thus allowing for a new start financially.
There is a caveat to this, however. Under bankruptcy law, there are certain debts that will not be dischargeable, even if the Illinois resident is otherwise eligible for a Chapter 7 liquidation. For reasons of public policy, the federal government and the state have determined that people should not be allowed to discontinue paying debts they have taken on for certain purposes.
These exceptions to the ability to discharge debts in bankruptcy may not come as a surprise to some, as they generally include money owed to the government itself, or that intended to help another individual. For example, student loan and most tax debts cannot be discharged through the filing of a bankruptcy petition. Likewise, child support and alimony owed to an ex-spouse or custodial parent of a person’s child will not be cancelled through the Chapter 7 process.
The other type of debt that cannot generally be wiped away through bankruptcy is ‘secured debt,’ though the full amount may not end up being paid. Secured debt is that money that was loaned on the promise that if it was not paid back, the creditor could take back the property that was purchased with the loan. Car loans and most mortgages would fall into this category.
It should be noted that the above debts will still have to be disclosed to the bankruptcy trustee and court, even if they will not be discharges through the proceedings. Those with questions about what debt they might or might not be able to get rid of by filing Chapter 7 bankruptcy may wish to contact an experienced Illinois attorney.