If you're prudent with your finances and work hard to avoid debt, it might sound unfair that bankruptcy courts will forgive someone's debts just because they couldn't repay them. Where's the accountability?
First off, not all debts can be erased. In fact, there are 19 separate categories of debt that are off-limits to bankruptcy protection. The most significant obligations that must be paid — no matter what — include [source: Harelik]:
- Alimony and child support – Any money owed to children and ex-spouses must be paid, regardless of bankruptcy, and that includes any legal fees owed to an ex-spouse from divorce proceedings.
- Student loans – Yup, even bankruptcy won't free you from student loan debt, and that includes federal, private and school-based loans.
- Taxes – If you owe money to the IRS, you're most likely stuck with it.
- Fines and restitution – If you committed an offense that resulted in court-ordered payments, you're still on the hook for that money.
- Personal injury – If you owe money from a personal injury case, that can't be discharged. That includes any debts related to a drunk driving case.