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Americans owe a lot of debt. According to the most recent data cited by Business Insider, the collective U.S. household debt is $17.5 trillion (2024). How much debt is a problem? The answer depends entirely on the specific financial circumstances of a person and their family. With that being said, if you are struggling to keep up with your payments and/or falling deeper into debt each month, it may be time to look for a solution.
Personal bankruptcy protection—whether through Chapter 7 or Chapter 13—is the right for many people who are dealing with financial challenges. Bankruptcy can be a chance for a fresh start. However, not all debts can be cleared through a personal bankruptcy filing—even a liquidated bankruptcy. Here, our San Francisco bankruptcy lawyer highlights the big three types of debts that you cannot directly discharge in the personal bankruptcy process in California.
Know the Three Most Common Debts You Cannot Eliminate Through Bankruptcy
- Your Mortgage
Are you a homeowner in San Francisco or elsewhere in the Bay Area who is dealing with serious financial challenges? Beyond considering bankruptcy protection, you may be falling behind on your mortgage payments and worried about the risk of a foreclosure. While declaring personal bankruptcy can provide relief from many types of debt, it generally does not eliminate your mortgage. The reason? Your mortgage is a secured debt. The loan is backed by a physical asset—in this case, your home. Filing for bankruptcy will often delay foreclosure temporarily—indeed, you get the benefit of an automatic stay—but neither Chapter 7 bankruptcy or Chapter 13 bankruptcy will permanently erase the obligation to pay your mortgage if you wish to keep your home.
The good news. There are still solutions. If you are facing bankruptcy and worried about your mortgage, you have several options. Chapter 13 bankruptcy might be a viable route—as it is this bankruptcy process allows you to include your mortgage arrears (back due mortgage debt) in your repayment plan. You can then spread these payments out over the term of the plan. Most Chapter 13 repayment plans last for between three years and five years. It is an option that can provide some breathing room to catch up without the immediate threat of foreclosure. A San Francisco bankruptcy lawyer may also be able to help to negotiate a mortgage modification with the lender.
- Delinquent Taxes
Delinquent taxes are not dischargeable in bankruptcy. You cannot eliminate federal income tax obligations through personal bankruptcy. Likewise, you cannot eliminate California state income taxes through bankruptcy. Certain older, unpaid taxes may be dischargeable under specific conditions—but that is usually only when the statute of limitations has expired. For federal income taxes, the government has ten years to collect. The Internal Revenue Service (IRS) explains clearly that “during your bankruptcy case you should pay all current taxes as they come due.”
Even though your delinquent taxes are not subject to a discharge, there are still a lot of solutions available to resolve them. In effect, back taxes can often be settled for less—potentially even pennies on the dollar—for people who have serious financial problems. For managing delinquent taxes while dealing with bankruptcy, you may consider an installment agreement or an offer in compromise with the IRS. An installment agreement allows you to pay your tax debt over time, while an offer in compromise could settle your tax debt for less than the full amount owed if you can prove paying the full amount is infeasible
- Child Support
Child support debts cannot be discharged through personal bankruptcy. California law is clear: Child support that is past due is a priority debt. Filing for bankruptcy will not alter existing child support obligations. Beyond that, it will not stop the accumulation of current child support obligations or any late fees associated with missed payments. Parents have a duty to keep up with any existing child support obligations during the course of the bankruptcy process.
Once again, there are options available for people in San Francisco dealing with genuine financial challenges. If you are struggling with child support debts and considering bankruptcy, it’s important to explore other avenues. Communicating with your local child support enforcement agency can be a first step. In many cases, it may be possible to request a modification of the child support order if your financial circumstances have significantly changed. However, such modifications do not affect the amounts already owed—only future payments. Further, your child support obligation is a valid monthly expense that can be considered when determining how much you can repay towards other existing debts—such as credit cards or medical bills.
Why Rely On Resolve Law Firm for Bankruptcy in San Francisco
Not all personal debts can be charged through bankruptcy. That is true regardless of whether you are filing for Chapter 7 bankruptcy protection or Chapter 13 bankruptcy protection. With that being said, bankruptcy is still the best path forward for many people and families in San Francisco who are dealing with serious financial challenges. Further, other debts—such as your mortgage or overdue taxes—can and should be dealt with at the same time. Our founder and lead attorney Le’Roy Roberson helps people solve financial problems. You deserve a more stable future. Along with other things, our San Francisco bankruptcy lawyer is ready to:
- Hear what you have to say and answer questions about bankruptcy/debt relief options;
- Help you gather and prepare all supporting financial documents and records; and
- Take whatever legal action is needed to help you navigate the bankruptcy process.
Get Help From Our San Francisco, CA Bankruptcy Lawyer Today
At Resolve Law Firm, APC, our San Francisco bankruptcy attorneys provide comprehensive, solutions-focused guidance and support to clients. Let us help you find a brighter, more stable financial future. Call us now or contact us online for a free, no obligation, and 30-minute consultation. Our firm provides bankruptcy services in San Francisco and throughout the Bay Area.
