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One of the first questions people often ask when they contact a Roseville bankruptcy lawyer is which debts bankruptcy can eliminate in California.  This article reviews whether different chapters of bankruptcy, including Chapter 7 and Chapter 13, can get rid of court fees and fines owed to the U.S. government by filers.

What Does it Mean if a Debt is Dischargeable?

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Debts are divided into several categories when filing for bankruptcy in California.  For example, some debts are deemed “dischargeable” while others are classified as “non-dischargeable” debts.

Put simply, a dischargeable debt is a debt which the filer will no longer be liable for when the bankruptcy is discharged by the bankruptcy court.  Conversely, a non-dischargeable debt is a debt that will remain with the filer even after the bankruptcy case is over.  Unlike dischargeable debts, which are effectively wiped out, non-dischargeable debts must be paid regardless of a bankruptcy case’s successful completion.

Are Court Fees and Government Fines Dischargeable in Bankruptcy?

Generally speaking, many court fees are non-dischargeable in Chapter 7 bankruptcy, which means they cannot be wiped out by the discharge.  By comparison, Chapter 13 gives the filer time to pay off a greater array of court-related debts over the course of the three- to five-year plan of reorganization, but requires that such debts be paid in full.

Overall, the Chapter 13 discharge is more expansive than the Chapter 7 discharge, and allows a greater variety of debts to be discharged — including debts arising from a variety of penalties and fines.  To provide a few examples, the following fees and fines are dischargeable in Chapter 13, but not Chapter 7 bankruptcy:

  • Debts arising from malicious, willful property damage (but not bodily injury — for example, injury or death related to DUI)
  • Debts arising from divorce proceedings, such as property settlements

Unlike Chapter 7 bankruptcy, Chapter 13 can also create for filers an opportunity to discharge government fines and court fees such as unpaid bridge tolls, building code violation fines, and parking tickets.  However, even with the broad discharge afforded by Chapter 13 bankruptcy in California, there are still certain court judgments which cannot be discharged under any circumstances.  For example, regardless of whether an individual files for Chapter 7 or Chapter 13 bankruptcy, he or she will not be able to discharge debts arising from court-ordered alimony payments and/or child support payments.

Discharging Income Tax Debt in Chapter 13 and Chapter 7

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Income tax-related debts are subject to a few unique regulations in bankruptcy cases.  In Chapter 13 and Chapter 7, income tax obligations may be eligible for discharge if certain criteria are satisfied.  A debt related to income tax may be discharged in Chapter 13 or Chapter 7 in California if the following conditions are met:

  1.  The taxpayer did not commit fraud or tax evasion.
  2. The tax return was filed a minimum of two years before the debtor filed for bankruptcy.
  3. The tax return was due a minimum of three years before the debtor declared bankruptcy, including extensions where applicable.
  4. The Internal Revenue Service (IRS) did not assess the debtor’s liability for the debt during the 240 days preceding the bankruptcy: the taxes must have been assessed 240 days ago or more.

Additionally, filers should be aware that, while bankruptcy can release the debtor from liability for the tax obligation itself, the discharge does not wipe out liens arising from tax-related debts.

CA Bankruptcy Lawyers Serving Roseville, Sacramento, and Folsom

Chapter 7 bankruptcy and Chapter 13 bankruptcy enable filers who follow the bankruptcy court’s rules to eliminate or restructure many of their most burdensome debts, including but not limited to credit card debt, medical debt, business debts, and debt related to personal loans.  Depending on the circumstances, it may also be possible to eliminate certain court fees, government fines, and debts related to income tax.

If you are struggling to manage debt related to medical bills, credit cards, older income tax obligations, or other sources of debt, Chapter 7 or Chapter 13 bankruptcy may be an effective and practical method of regaining control over your finances.  Consider talking to a Folsom Chapter 13 bankruptcy attorney about how filing for bankruptcy in California may be able to help you achieve your goals and protect your personal property and assets.

The Folsom Chapter 7 lawyers of The Bankruptcy Group have extensive experience assisting married couples, single individuals, and business owners with consumer bankruptcies and business bankruptcies, including Chapter 11, Chapter 13, and Chapter 7, in Roseville, Sacramento, and Folsom.  To arrange a free and completely confidential legal consultation about your bankruptcy options in California, contact The Bankruptcy Group as soon as possible by calling (800) 920-5351.