Bankruptcy can be a powerful tool for financial relief, but not all debts can be erased. Non-dischargeable debts remain enforceable even after bankruptcy, which means individuals must find alternative ways to manage them. If you’re dealing with non-dischargeable debts in Washington, knowing how to handle them effectively can make a significant difference in your financial future. This article explores practical strategies for managing these debts, relevant federal and state laws, and alternative solutions beyond bankruptcy.
What are Non-Dischargeable Debts?
Non-dischargeable debts are those that cannot be eliminated through bankruptcy which can be found under 11 U.S.C. §523 . These include obligations that arise from legal, moral, or financial responsibilities, such as student loans, tax debts, child support, and court fines. Key laws governing non-dischargeable debts include U.S. Bankruptcy Code (Title 11, US Code), Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) and WA State laws on debt collection and exemptions. While these debts cannot be erased, they can often be restructured or negotiated. Knowing your options can help you take control of your financial situation.
Strategies for Handling Non-Dischargeable Debts
1. Managing Student Loans
Under 11 U.S.C. §523(a)(8), student loans can only be discharged if you prove “undue hardship” through the Brunner Test, which is difficult to meet. Instead, you may consider alternative options. Income-Driven Repayment (IDR) plans adjust federal student loan payments based on your income, potentially lowering monthly payments and extending the repayment period. Public Service Loan Forgiveness (PSLF) allows borrowers working for nonprofits or government agencies to qualify for loan forgiveness after making 120 qualifying payments. Loan consolidation can simplify payments and may reduce interest rates. Additionally, private lenders may offer hardship programs, deferment, or modified repayment options for struggling borrowers.
2. Handling Tax Debts
Most tax debts are non-dischargeable under 11 U.S.C. §523(a)(1), but you may have options. One option is an Installment Agreement, which allows taxpayers to set up payment plans to spread tax debt over time with the IRS or Washington State to manage their tax debt over time. Offer in Compromise (OIC) is another option where one may qualify to settle tax debts for less than you owe if you can demonstrate financial hardship. Penalty Abatement: You can request removal of penalties if you have reasonable cause, such as a serious illness or natural disaster. Certain older tax debts may be eligible for discharge if they meet the 3-year, 2-year, 240-day rule when filing for Bankruptcy (consult a Symmes Law Group now to verify eligibility!).
3. Keeping Up with Child Support and Alimony
Under 11 U.S.C. §523(a)(5), you cannot discharge child support and alimony, but you can make payments more manageable. If your financial situation has changed, you can request a modification of child support or alimony orders through a WA family court. While you can’t eliminate these debts, you can create a structured payment plan over three (3) to five (5) years when filing BK Chap 13.
In contrast, not all debts from divorce proceedings are classified as support. Under 11 U.S.C. § 523(a)(15), certain non-support obligations—such as property settlements—are generally not discharged in Ch 7 but may be discharged in Ch 13.
4. Dealing with Court Fines and Criminal Restitution
Criminal fines and restitution (11 U.S.C. §523(a)(7)) are non-dischargeable, but options exist:
- Payment Plans: Courts often allow monthly payment arrangements to avoid additional legal consequences.
- Alternative Sentencing Programs: Some jurisdictions allow community service in place of monetary penalties.
- Appealing the Amount Owed: If you believe the amount assessed is incorrect, consulting an attorney may help you reduce or contest the fine.
5. Addressing Debts from Fraud or Willful Misconduct
Debts incurred through fraud, embezzlement, or intentional misconduct (11 U.S.C. §523(a)(2), (4), and (6)) are non-dischargeable, but you may still have options:
- Settlement Negotiations: Some creditors may agree to a lump-sum settlement or a reduced repayment plan.
- Structured Repayment Plans: If the debt stems from a civil judgment, negotiating with the opposing party can help establish a reasonable repayment schedule.
6. Government Fines and Penalties
If you owe money to government agencies, these debts (11 U.S.C. §523(a)(7)) are typically not dischargeable. However, you may be able to Request Payment Extensions or Waivers since some agencies allow financial hardship waivers or deferment options. Also option to Negotiate for Lower Penalties where on Certain government fines, like parking tickets or minor infractions, may be reduced through administrative hearings.
Alternatives to Bankruptcy
If bankruptcy isn’t the best solution due to non-dischargeable debts, other debt relief options are available. First is Debt Settlement Programs where a debt settlement attorney can help reduce what you owe on certain types of debts or arrange for a repayment plan structure. Contact Symmes Law Group, PLLC at 206-486-7962 for settlement of a debt! In some cases Credit Counseling agencies can also assist which offer budgeting and repayment strategies for managing financial hardship or can sometimes negotiate a reduction on interest payments. Legal Assistance in general and consulting with a bankruptcy debt attorney, or consumer protection attorney can also help you explore potential defenses against creditor claims, debt validation, asset protection and consumer claims under the Washington State Consumer Protection Act or the Fair Debt Collection Practices Act among other laws.
Conclusion
While bankruptcy provides relief from many debts, non-dischargeable debts require proactive management. Understanding legal options, negotiating repayment plans, and utilizing available resources can help Washington residents regain financial stability.
If you’re struggling with non-dischargeable debts, contact Symmes Law Group, PLLC at 206-486-7962 or schedule your consultation here now. Don’t wait—your financial freedom starts here!
