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Are Outstanding Debts Exempt From Bankruptcy

Feb 9, 2008
Strange as it may seem for somebody filing for bankruptcy but some outstanding debts are exempt from the process. What this means is that regardless of the outcome of a bankruptcy process, you will still have to pay off these debts. This article will cover the main types of debts that are considered to be exempt and give you advise on how to determine what you will and won't have to pay for after the process is completed.

Many people are concerned about maintenance payments and child support. For anyone that has a court order requiring them to pay these amounts then bankruptcy will not exempt you from paying any outstanding money. Thus any debts that have been accrued in supporting these awards are not covered should you file for bankruptcy. All of the law chapters are included in this, including the personal chapter 7 and chapter 13. A lot of people think that filing for bankruptcy will absolve them (or at least protect them) from this debt. However the laws mean that they will have to find this money in full.

Another common debt that is exempt is known as IRS liens. First a little background, if you have been audited by the IRS at some point and found to owe them money they can enforce a lien on your house or garnish your wages. Depending on the amount you owe the government, this amount can add up to a large amount of money that is, unfortunately, exempt from bankruptcy.

Whilst covering the government, it should also be noted that any government loans are generally considered to be exempt from bankruptcy. Remember that this applies to student loans that are covered by the government too and are a common form of finance for young people.

And the last important debt that is exempt from bankruptcy is any court orders that are handed down to you to pay a sum of money to a creditor before the bankruptcy process was ever instigated.

These are some of the reasons why you should go into the process of bankruptcy fully aware of your responsibilities and the limits of the laws. For example, you could well have more debts that the courts can't do anything about. It would defeat the purpose of filing if you ended up with a low credit history and still had a huge outstanding debt with people.

Before going down this route you should conduct a thorough audit of your finances. You should qualify all your outgoings and your current monthly income. If any of the outgoings are any of the above them you may want to reconsider filing for bankruptcy.

Additionally, you should find out if there are any outstanding judgments awarded by courts against you. You will be aware of this (even if you have chosen to forget it) as the law requires you to be notified if any litigation process is begun against you. To clarify, you can't be protected by the bankruptcy law against these types of debts.
About the Author
Do you know the consequences of bankruptcy, especially exempt assets for bankruptcy and debt exempt from bankruptcy . Adrian writes on ways to deal with debt.
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