When your bank account can no longer keep up with your lenders’ demands, you might look for more other debt relief options, such as filing for bankruptcy. However, it’s important to be aware of exactly what this legal measure can do. Many individuals believe bankruptcy to be a last resort and a catch-all for debt issues, but there are limits to this method of forgiveness.

4 Types of Debt Bankruptcy Won’t Erase

1. Unpaid Taxes

While there are some exceptions for income taxes, most taxes will need to be paid after you file for bankruptcy. If you plan to file for Chapter 7 bankruptcy, you may still owe taxes at the end of the case. If you file for Chapter 13, you’ll be required to pay them over time through an established repayment plan; however, interest on the tax debt may still accrue. 

2. Most Student Debt

If you’ve fallen behind on your student loan payments, you likely can’t get rid of them by filing for bankruptcy. In very few cases, debtors can prove that they are facing “undue hardship,” which means they can’t pay back their loans now or in the future. However, in most bankruptcy situations, you’ll still owe your financial aid lenders in the end.

3. Child Support & Alimony

If you were divorced and a judge issued a ruling for you to pay child or spousal support, you can’t get out of these payments through the bankruptcy process. Just like unpaid taxes, you’ll have to work them into your Chapter 13 repayment plan, or you’ll continue to owe them at the end of your Chapter 7 case. Additionally your divorce decree may require you to pay certain lenders and “hold harmless” your former spouse. 

4. Property Liens

While bankruptcy erases debts, it doesn’t do the same for liens. Therefore, if you can’t afford a property and the creditor attempts to foreclose or repossess it, a bankruptcy filing won’t allow you to keep the house or building. Instead, the creditor will be allowed to take ownership of the property, auction it off, and use the money towards what you owe. Bankruptcy may still be a good option if you do not want to keep that property. If you wish to retain that property a Chapter 13 plan can usually be proposed to stop the foreclosure process and catch up the missed payments. 

While bankruptcy can’t solve all financial problems, it can provide a fresh start for individuals in other forms of debt. If you want to see how the filing process could turn your life around, get in touch with Nancy V. Jacob of Cincinnati, OH, today. This trusted bankruptcy lawyer has 30 years of experience helping clients start anew, whether they use Chapter 7 or Chapter 13 bankruptcy. For more information on her practice areas, visit the website, and call (513) 921-1400 to schedule your free initial consultation.