Monday, September 18, 2017

What Doesn't Ch. 13 Bankruptcy Discharge?

Disclaimer, I am not a bankruptcy attorney. However, I was reviewing a Ch. 13 petition for bankruptcy the other day and found it somewhat interesting the debts that cannot be discharged in Ch. 13 bankruptcy, largely because I figured they were important policy determinations. You tell me what the underlying policy being promoted on each category of protected asset is; my best guess is enumerated below:


  1. Domestic Support Obligations - just because the debtor got in too deep, that does not mean that his children need support any less. Society has an interest in guaranteeing that children, who had no choice in who their parents are, get support lest society itself is obligated to provide it.
  2. Taxes and Certain Other Debts Owed to Governmental Units - government wants to get paid, and it doesn't want people shirking tax obligations by not paying when due, only to get too deep in debt and then not pay the government.
  3. Claims for Death or Personal Injury While Debtor Was Intoxicated - just because you declare bankruptcy, you still have to answer for getting drunk and running someone over.
  4. Student Loan Obligations
  5. Other Domestic Support, Separation Agreement, and Divorce Decree Obligations - as noted in regard to #1, plus the added bonus of all the divorce asset-hiding shenanigans in which people engage.
  6. Obligations to Pensions or Profit-Sharing, and Other Similar Obligations - as noted in #1, 2, and 3; generally I believe this is a business consideration. We don't want the boss shortchanging the pension just because he is dating the secretary behind his wife's back and buying the secretary new cars every six months, driving himself into bankruptcy. Those pension obligations need to be paid, as the employees who depend on that had no part in making the financial decisions that led to bankruptcy.

As you can see, I am a bit at a loss re. #4. I suppose it makes sense to ensure that wealthy professionals don't walk away from their student loan obligations right before their big pay day (i.e. doctor completes residency; attorney makes partner). However, that seems like a bazooka killing a gnat to me, and it smacks of the student-loan industry buying statutory provisions. 

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