The following program was produced by the United States Courts. As I mentioned before, some debts cannot be discharged in a bankruptcy. Certain types of debts, such as child support, alimony, most student loans, some federal income taxes, and all employer withholding taxes, cannot be discharged in bankruptcy. the debtor’s wrongful conduct may make some
debts non-dischargeable. Examples of such conduct are incurring credit
card charges without the intent or ability to repay, or obtaining loans using false financial information. Bankruptcy does not wipe out most mortgages
or liens. A debtor who wants to keep his or her house must continue making mortgage payments. A debtor who wants to keep a car which is being
financed must likewise continue making the payments. A debtor who is behind on mortgage payments may use Chapter 13 to keep his or her
home by catching up on past due payments over
time, plus making regular mortgage payments. And in a Chapter 7 case, certain property can be redeemed from a lien,
or in other words, purchased for what it is worth. For example, in a bankruptcy proceeding the court may determine that a car on which
the debtor owes $3,000 is only worth $1,500. The debtor may then keep the car by paying
the lump sum of $1,500. In either chapter, some liens on exempt
personal property may be avoided altogether so that the debtor keeps the property without making further payments. Under certain circumstances, a debtor may be
denied a discharge altogether, and continue to owe all debts as if the
bankruptcy had never been filed. Some of the reasons for being denied a discharge are fraudulently transferring assets, hiding assets, making false statements, or disobeying the bankruptcy court. Such acts may also be federal crimes for which
the debtor can be fined or imprisoned. We’ll tell you more about that in a later
segment of this video. The bankruptcy code limits the frequency with
which an individual may receive a discharge. These limits depend on the chapters under
which the debtors file. As mentioned earlier, the law permits debtors
in bankruptcy to keep or exempt certain property in order to make a fresh start. However to keep liened property such as
a home or a car, the debtor must still pay the secured debt. In Chapter 7, the exemption process means
that a trustee cannot sell exempt property for the benefit of creditors. Generally, the trustee can only sell non-exempt
property. Sometimes an item of property is only partially exempt,
and the trustee can sell it and pay the debtor the amount of the exemption. For example, if the debtor owns a car worth $3,000, and lives in a state where there’s a car exemption
of $1,000, the trustee may sell the car, give the debtor $1,000—the exempt amount—and use the remaining $2,000 to pay creditors. In such situations, the debtor may keep the
car by paying the trustee $2,000, the value of the car that is not exempt. The bankruptcy code provides certain federal
exemptions and also allows each state to adopt its own exemption
law in place of the federal exemptions. The availability and amount of property you may exempt,
therefore, depends on the state where you live. Some common examples of exempt property
under the bankruptcy code are: a portion of the equity in a debtor’s home, a portion of the equity in one motor vehicle and some or all “tools of the trade” used by the debtor
to make a living, such as auto tools for an auto mechanic or
dental tools for a dentist. You’ll lose any exemption you don’t claim. It’s therefore very important for you to consult
an attorney to determine which exemptions are available. It’s also important to carefully list, describe
and value all property you claim as exempt in the schedules filed with your bankruptcy petition.