Bankruptcy is a legal way to get a clean financial slate, but there are some limitations. When people file for personal bankruptcy in Arlington Heights, they start a federal process that usually leads to a creditor meeting, court hearing or both. They also put a pause on all debt collection. After a debtor has filed for bankruptcy, their creditors must wait for the results of the case. However, some of their debts may never go away, no matter what happens with their bankruptcy filing.
Non-Dischargeable Debts in Illinois
Federal law determines the outcome of bankruptcy cases, but states enforce their own exceptions and requirements. Some debts cannot be discharged in specific states, so debtors are still responsible for paying them. According to Illinois bankruptcy law, non-dischargeable debts include:
- Legal fines and penalties – traffic tickets, damages related to DUIs, fines for criminal offenses
- Student loans – unless bankruptcy lawyers can prove they are an unreasonable burden
- Family support – child support and alimony
- Owed income taxes – any back taxes from the past three years
- Secured property debts – if a debtor intends to keep a house or car, they must make the necessary payments
Unlisted debts cannot be discharged either, because the court isn’t aware of them. However, creditors must discharge unlisted debts if they learn about the bankruptcy proceeding. Illinois also grants bankruptcy exemptions for several types of assets, including vehicles and property under a certain value and many government pensions.
These rules apply to everyone who successfully declares bankruptcy. Whether a debtor files for Chapter 7 or Chapter 13 bankruptcy, they must repay their non-dischargeable debts after other debts are discharged. However, Chapter 7 has additional limitations that leave room for court challenges.
Debts that May Be Challenged
Some dischargeable debts eventually join the non-dischargeable category. Debtors who file for Chapter 7 bankruptcy are vulnerable to legal challenges if they have certain types of debts. Creditors may challenge requests to discharge debts related to:
- Fraudulent activity
- Willful injury to person or property
- Embezzlement or larceny
- Divorce settlement (some limitations)
- Luxury goods and services (must exceed $1550 within 60 days)
- Loans and cash advances (must exceed $1550 within 60 days)
If a debtor owes money because of crime, divorce or luxury spending, their creditors have the right to prove it in court. The law doesn’t allow immunity from these debts, so it’s important for bankruptcy lawyers to exclude them from the filing or provide proof that they’re legitimate.