As you likely know, Chapter 7 bankruptcy in Montgomery County, TX is a useful tool for people who are buried under mounting personal debt, but it is not a cure-all. There are some types of debt that cannot be discharged, or forgiven, under Chapter 7 bankruptcy, and this includes student loans and property taxes.
Let’s take a closer look at these types of debts and how the bankruptcy courts handle them.
It may seem unfair that you can almost never get a discharge from student loan debt, considering how many other types of personal loan debts you’re able to discharge under Chapter 7 bankruptcy, but that’s the way it works.
In 1998, Congress eliminated the ability to discharge student loans in bankruptcy except for the “undue hardship” exception. In 2005, Congress extended the “undue hardship” protection to private student loans, as well.
As indicated in the section above, there are, however, some circumstances in which you’re able to get at least some of your student loan debts discharged if you’re able to prove financial hardship under what’s called the Brunner test. The Brunner standard used is as follows:
- You have extenuating circumstances that have created a significant financial hardship
- The circumstances will continue for a term of the loan
- You have already made good-faith efforts to repay the loan
To have your student loans discharged, you’d need to file an Adversary Proceeding in which you present evidence of your undue hardship and show that you deserve a discharge through the Brunner standard.
Keep in mind that it is pretty rare that people actually pass the Brunner test—the overwhelming majority of people who file for Chapter 7 bankruptcy in Montgomery County, TX will still be on the hook for paying back their student loans.
Property taxes are among the other common types of debts that people have built up when they prepare to file for bankruptcy. Any property taxes less than a year old on the date one files for bankruptcy cannot be discharged at all in Chapter 7 bankruptcy, without exception.
In addition, bankruptcy cannot eliminate property tax liens. Those liens will survive your bankruptcy, which can make it difficult for you to sell off your home if you’re interested in doing so as part of a way to get some money back. In such a case, your better option may be to file Chapter 13 bankruptcy, which allows you to reorganize your debts into a repayment plan that lasts for three to five years.
If your property taxes date back more than a year, you may be able to get them discharged, but again, it may take an Adversary Proceeding in bankruptcy court for you to accomplish this.
If you’re interested in learning more about the kinds of debts that can and cannot be discharged under Chapter 7 bankruptcy and particularly about how property taxes and student loans can be affected by bankruptcy proceedings, contact an experienced Chapter 7 lawyer in Montgomery County, TX today.