A lot of people think bankruptcy means all of your debts are immediately forgiven and you start over with a clean slate. That isn't often the case. Not only are your assets often liquidated, some debts also aren't even dischargeable in bankruptcy.
Photo by Markus Spiske raumrot.com.
Personal finance site Super Savings Tips lists a few types of debt that aren't dischargeable in bankruptcy. Your government student loans, for example, aren't discharged. A few others include:
Debts you owe the government: Have you been penalised or fined by the government? If so, I'm afraid bankruptcy can't give you any relief. No one can give you any relief. You have to pay the fines and penalties or they will stay with you till your last breath. If you have more questions regarding government debt and how it will be treated in bankruptcy, then consult an attorney.
Child support and alimony: Child support payments and alimony aren't dischargeable in bankruptcy. These two basically comprise the amount your child or ex-spouse needs for covering basic living expenses. Debts you owe due to marital property division don't come under this kind of support. In a few states, these debts are dischargeable in bankruptcy.
A car you bought recently: Have you purchased a car or an expensive piece of jewellery before filing bankruptcy? If so, then you have two options. The first option is to continue making payments to the lender. The second option is to give up the item.
For most people and businesses, bankruptcy is a desperate last resort. It's also widely misunderstood.
Though Super Savings Tips focuses on the US, most of the information in their article also applies to Australia. For more detail, visit the Australian Financial Security Authority.
6 Types Of Debts You Can't Kick Out In Bankruptcy [Super Savings Tips]