Does Bankruptcy Clear Court Fines in California?
What Does It Mean if a Debt Is Dischargeable? 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 for which the filer will no longer be liable when the bankruptcy court enters a discharge order on the debtor’s behalf. 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. As a matter of public policy, Congress determined that certain debts would not be dischargeable in bankruptcy. More specifically, there are nineteen categories of debt that cannot be discharged in bankruptcy. For all practical purposes, the following debts are non-dischargeable. A debtor would have to demonstrate extraordinarily rare circumstances to have a court discharge any of the following debts.
Debt that was not included on your bankruptcy schedules, unless the creditor was aware you were filing for bankruptcy
Alimony or child support
Penalties or fines owed to government agencies
Personal injury debt or judgments arising from a drunk driving accident
Debts arising out of a tax-advantaged retirement plan, for example, a 401(k) loan
Cooperative housing or Condominium fees
Attorney fees incurred for child support or custody
Criminal restitution and other court fines The other non-dischargeable debts will only be non-dischargeable if successfully challenged by the creditor. For example, if you purchased a luxury good within 90 days of filing for bankruptcy, the creditor could challenge whether the debt should be discharged. Other debts that could be challenged include those obtained fraudulently, under false pretenses, and debts that were incurred through the willful and malicious injury to a person or property. In these situations, a hearing will be scheduled and both sides, the creditor and debtor, are entitled to present their arguments.
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 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 that cannot be discharged under any circumstances. For example, regardless of whether an individual files for Chapter 7 or Chapter 13 bankruptcy, they will not be able to discharge debts arising from court-ordered alimony payments or child support payments.
Discharging Income Tax Debt in Chapter 13 and Chapter 7 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:
The taxpayer did not commit fraud or tax evasion.
The tax return was filed a minimum of two years before the debtor filed for bankruptcy.
The tax return was due a minimum of three years before the debtor declared bankruptcy, including extensions where applicable.
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.