Can You File Bankruptcy on a Court-ordered Fine?
If you owe a lot of court fines, bankruptcy may feel like a viable option. Unfortunately, you cannot reduce or eliminate any type of court fines under any type of bankruptcy, according to the book "How to File for Chapter 7 Bankruptcy." While federal bankruptcy laws enable you to eliminate some types of debt, court fines aren't the only debts barred from this legal debt relief process.
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Other Legal Considerations
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If you committed a crime such as fraud or drunken driving and are successfully sued in court, you also cannot include those types of debts in bankruptcy, warns the book "How to File for Chapter 7 Bankruptcy." In addition, if you charged up credit cards or got loans right before filing bankruptcy or lied to get credit, you can't include these debts in your case. Some instances of lying on credit applications or incurring debts right before bankruptcy are prosecutable as federal crimes of bankruptcy fraud; this crime can lead to hefty fines and even federal imprisonment.
About Familial Support Obligations
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Bankruptcy reform laws passed in 2005 placed more emphasis on the importance of parents paying their child support on time, according to the U.S. Government Accountability Office. Parents cannot include past, present or future child support obligations in their bankruptcies. The same rule applies to alimony.
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Regarding Taxes
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Federal, state and local tax bills are also considered "priority" debts in the bankruptcy process. Debtors can only reduce or eliminate such debts if the bills are at least three years old. People who did not file their tax returns on time cannot use the tax year to start the three-year window of time; the time frame kicks in when the return itself is filed. Also, people cannot file any type of bankruptcy if they haven't filed their last three tax returns.
Student Loan Considerations
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You usually can't include student loans issued by the federal government in bankruptcy. If you have privately-issued student loans, you can include them in your case. But unless a bankruptcy judge approves a rare exception in your case, count on fully repaying those federal student loans just like you must for court fines, recent taxes, criminal damages and familial support. Judges only grant exceptions if you have a serious and permanent disability that makes it unfair for you to repay the debt or if your college closed or committed an act of fraud.
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