Exempt Debts: Certain Debts Cannot Be Discharged During Bankruptcy
Interviewer: Is there anything that you can’t get rid of in a bankruptcy? Are there exempt debts that can’t be discharged in bankruptcy?
Adam: The biggest one that comes to mind is probably student loans. They are not dischargeable.
Interviewer: Federally subsidized student loans?
Adam: Yes, subsidized loans for school.
Interviewer: Are there any judgments or debts that you can’t get rid of in a bankruptcy?
Adam: There could be some, especially if there was a judgment that resulted from an assault with an intentional infliction of harm or any kind of intentional tort. Those wouldn’t be dischargeable either.
Interviewer: What about financial crimes like fraud and things like that? Are those dischargeable in bankruptcy?
Adam: That would be something that is intentional gain. That wouldn’t be dischargeable.
Interviewer: What about tax liens from the government? Is that dischargeable?
Adam: Tax liens will not be dischargeable per se, but if you are in that position, the government will most probably work with you on reducing that amount.
Interviewer: Is there anything else that you can think of that doesn’t get the benefit of being discharged during bankruptcy?
Adam: If there was an intentional fraudulent income tax evasion that wouldn’t be dischargeable.
Scenarios That Can Delay Bankruptcy
Interviewer: It sounds like most bankruptcies are pretty simple, but what can make them complicated? What kind of scenarios have you seen where it is not so simple and where it is not two minutes in front of the trustee? What things make that happen?
Adam: The biggest thing that I see in bankruptcy court that may not necessarily revolve around a bankruptcy per se, but occurs when a trustee is trying to call back money from say a Ponzi scheme or a Pyramid scheme. If that occurs, they will go through everybody’s finances to see how much money was made off of this person.
Then, they wind up filing a complaint against somebody that made more money than they invested.
Interviewer: Like Bernie Madoff?
Adam: Yes, good example.
Interviewer: How often have you seen that happen? How often are the unusual bankruptcies, are a difficult ones, where you get into litigation?
Adam: It is not uncommon. I just recently handled that type of case two weeks ago. Somebody was involved in one of the larger Ponzi schemes. I would hazard to bet that there is probably at least one small Ponzi scheme that is discovered every month.
Interviewer: That is interesting. What if someone has dozens of creditors or they just owe unbelievable amounts of money, have you seen that? Is that rare and more difficult to deal with?
Adam: You won’t see those cases frequently because at some point in time, that person’s credit line is going to be stopped. So, a person who has a significant amount of debt had to have a high credit limit at one point in time.
Interviewer: Sure then credit is a lot tighter and banks are less generous. In this day and age, it is probably a lot less likely that people will have as massive a debt, is that right?
Adam: Yes, that is true, especially now. It’s tough to get high lines of credit now without providing a security interest in a home or other large asset.
Interviewer: In your area are there document preparation places that would say, charge $299.00 for bankruptcy? Are there places like that where you practice?
Adam: I don’t believe that they’re allowed to be in Ohio and they are prohibited. There are none to my knowledge of such places.
By Adam Hunt