Under Minnesota and federal bankruptcy law, there are a few types of debts that you cannot escape by filing for bankruptcy.
Some Tax Debt – IRS and Minnesota Department of Revenue
You cannot discharge some tax debt in bankruptcy. If you owe a debt to the IRS or the Minnesota Department of Revenue for income taxes from the past three (3) years, you cannot discharge your tax debt in bankruptcy. The public policy basis for this is you already received the money, and you should have paid your taxes out of the money, so if the government allowed you to not pay your tax debt, the government would be creating a tax loophole permitting people to game the system. For this reason, paying down your tax debt should be a top priority.
Federal Student Loans
Federal student loans are generally not dischargeable in a bankruptcy. As you can imagine, many students are poor, and if the government allowed them to file for bankruptcy immediately after getting their education, a vast amount of students would never repay their student loans. The government has determined that education is an investment that is paid back over time, so federal student loans are not dischargeable in bankruptcy. Interestingly, student loans typically are dischargeable upon the death of the student.
It should be noted that there is a rare exception under certain extreme circumstances where a person can discharge federal student loans. To discharge federal student loans, you must show that the loans “will impose an undue hardship on you and your dependents.” To discharge a student loan in bankruptcy, the general rule of thumb is that you must show that a serious physical ability or other extreme situation will prevent you from being able to repay the student loan. Since Court opinions vary from state to state, you should contact a bankruptcy attorney to discuss whether your situation would permit you to discharge a student loan.
Some Families Support Obligations
Certain family support obligations that resulted from a divorce or child born out of a marriage are not dischargeable in bankruptcy. This typically includes child-support and alimony that was ordered by a court. Thus, you will most likely not be able to discharge your future family support obligations.
Theft or Conversion of Property
If you steal or wrongfully take another person’s property, you typically cannot file for bankruptcy as a way to keep that property. You have to give the property back. This is also true in the cases of intellectual property theft or misuse, which may include taking confidential information from a former employer. The idea is that you can’t take something and then file for bankruptcy in order to keep that item.
Other Debts Not Dischargeable in Bankruptcy
In addition to the categories listed above, there are certain other debts that are not dischargeable in bankruptcy. These exceptions to bankruptcy are rare or complex. For these, you should consult with a Minnesota bankruptcy attorney.
Are Your Debts to Dischargeable in Bankruptcy?
To find out if your debts are dischargeable in bankruptcy, a Minnesota bankruptcy attorney is available for a free consultation with you. The consultation with a Minnesota bankruptcy attorney will include an analysis of your debts, assets (things you own), and your recent transactions to determine the whether bankruptcy or another method is the best way to deal with your financial debts.