What Kind of Unsecured Loans Cannot Be Eliminated by Filing Bankruptcy in Ohio?

By Tom Streissguth

Filing for bankruptcy means asking a federal court to protect you from creditors. At the end of the process, the court will discharge -- that is, cancel -- any debts the law allows you to discharge. A debtor who files for bankruptcy protection must list all of his debts, whether they are secured by property or unsecured. The law allows you to discharge most, but not all, unsecured loans and other unsecured debts.

Filing for bankruptcy means asking a federal court to protect you from creditors. At the end of the process, the court will discharge -- that is, cancel -- any debts the law allows you to discharge. A debtor who files for bankruptcy protection must list all of his debts, whether they are secured by property or unsecured. The law allows you to discharge most, but not all, unsecured loans and other unsecured debts.

Dischargeable Debts

A "dischargeable" debt is one that bankruptcy law allows you to get rid of in bankruptcy. In the state of Ohio and every other state, federal law governs the discharge of debts. The same rules apply whether you file for protection in Ohio or anywhere else, and no matter where the creditor is doing business.

Get a free, confidential bankruptcy evaluation. Learn More

Student Loans

By law, a bankruptcy court may not discharge student loans. Although these debts are unsecured, you must repay them either through liquidation of your assets in a Chapter 7 bankruptcy, or through a repayment plan in Chapter 13. This applies whether you contracted the loans through a public agency, such as the Department of Education, or through a private lender, such as a bank or credit union. Any remaining balances on non-dischargeable debts after the bankruptcy closes remain valid. The creditor can pursue you through lawsuits, court judgments, liens, levies, and garnishments. You can only avoid repayment by claiming, while the bankruptcy case remains open, that the debt would cause an undue hardship -- a very difficult claim to prove and one that bankruptcy courts decide on a case-by-case basis.

Child Support and Spousal Support

Other forms of non-dischargeable debt include federal taxes less than three years old, as well as child-support and alimony obligations set down by a martial separation agreement or divorce decree. The debtor can request discharge of any support obligations that an ex-spouse has assigned to a third party. If an ex-spouse has assigned the right to collect alimony to a relative, for example, the court may discharge the alimony. The court may also discharge payments that are not actually used for support of the ex-spouse. Payments that are used in order to divide property or repay marital debts, for example, may also be dischargeable. The decision depends on the language of the divorce decree or marital settlement agreement -- and how the bankruptcy court interprets that language.

Gambling Debts

In 2009, the voters of Ohio voted in favor of a constitutional amendment that allowed the construction of the first casinos in the state. Gambling debts -- and loans such as credit card cash advances used to gamble -- appear on many bankruptcy schedules, and as unsecured debts, the bankruptcy law generally allows their discharge. However, the law also states that you may not discharge any debt contracted without a good-faith intention to repay on the debtor's part. The court considers the circumstances, particularly any repayment history, in deciding this.

Get a free, confidential bankruptcy evaluation. Learn More
How to File Bankruptcy With Unsecured Debt

References

Resources

Related articles

Define Bankruptcy Terminated

If you file for bankruptcy protection from creditors, a federal court gains jurisdiction over your assets, debts and financial affairs. The court has the authority to eliminate dischargeable debts, liquidate your assets or set up a repayment schedule (as in a Chapter 13 bankruptcy filing). However, the court also has the authority to dismiss or terminate the case, either on your motion or on its own initiative.

Can Banks Garnish Assets if Bankruptcy Is Filed?

Receiving a discharge of debts through bankruptcy provides debtors with a fresh financial start. However, relief often comes sooner. Once a debtor files his bankruptcy petition, his creditors must immediately stop all collection efforts, including wage garnishments.

Can the IRS Levy Wages if You Are in Chapter 13?

A chapter 13 bankruptcy allows you to stop collection actions by creditors, including wage garnishments. You must draw up a plan for partial repayment of unsecured debts, such as credit card balances and personal loans. After you've completed payment according to the plan, the bankruptcy court discharges any remaining unsecured debts allowed by law. You get a clean financial slate with the exception of some nondischargeable debts, like federal taxes.

Related articles

Is There Anything That Can Be Forgiven in a Chapter 13 Bankruptcy?

Bankruptcy is a legal process designed to help individuals and companies reduce or eliminate their debts. The laws ...

What Is Dischargeable in Bankruptcy?

Most debts are dischargeable, or wiped out, in bankruptcy, from credit cards and personal loans to medical bills and ...

Can You File Payday Advance on Chapter 7?

Filing for Chapter 7 bankruptcy protection provides many debtors financial freedom and a fresh start. Payday loans, ...

Can Chapter 7 Bankruptcy Discharge Education Expenses?

If you are filing for bankruptcy protection, you are seeking protection from your creditors. Bankruptcy gives debtors a ...

Browse by category