Tuesday, December 20, 2011

5 Common Misconceptions about Bankruptcy: #3 Freedom from All Debts

Unlike other legal issues, unmanageable financial debt is a problem that many are too ashamed to discuss with their friends and family. This means that many people piece together their knowledge about bankruptcy from unreliable and confusing sources. The result is that there are a lot of misconceptions about bankruptcy.  In these 5 posts we will write about the most common misconceptions that we hear from clients in our office.

Common Misconception #3: Freedom from All Debts

Another common misconception about bankruptcy, is that once it is over you no long owe any money to anyone.  In some cases this is true, but those cases are very rare.

Most people have some debts which are nondischargeable, which means they will still owe those debts, even after the bankruptcy is complete.  You may still be responsible for most taxes and student loans; debts incurred to pay non-dischargeable taxes; domestic support and property settlement obligations; most fines, penalties, forfeitures and criminal restitution obligations; certain debts which are not properly listed in your bankruptcy papers; and debts for death or personal injury caused by operating a motor vehicle, vessel or aircraft while intoxicated on alcohol or drugs.

Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the bankruptcy court may determine that the debt is not discharged.

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