Which Debts Cannot be Included in a Bankruptcy Plan?

October 6, 2014

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For debtors who have exhausted all options, bankruptcy can help clear the vast majority of their secured and unsecured debts, allowing them to start afresh. There are a number of drawbacks to seeking bankruptcy including the negative effect upon the individual’s credit rating, so the decision needs to be carefully considered before the solution is sought.

Furthermore, there are a number of debts which cannot be included in bankruptcy, remaining even after a debtor is declared bankrupt.

Student Loans

For years, there has been an urban myth circulating which suggested all you need to do to escape student debt is move abroad for 5/10 years. Unfortunately this excuse for an extended holiday has no footing in the truth and student debtors moving abroad are required by law to inform the Student Loans Company upon moving.

A bankruptcy plan also does not negate the necessity to repay student debt. This iron-clad loan will remain on your record and you will be required to make repayments on the debt throughout the bankruptcy and beyond if your income is above the threshold. Student loan repayments are traditionally deducted from income in small, regular repayments.

Court/Magistrates Fines

Any outstanding courts and magistrates fines you have incurred before or during the bankruptcy process will still need to be paid. This includes any fines which have been handed to the individual seeking bankruptcy or any organisations/companies the debtor is financially responsible for.

Seeking bankruptcy will not clear any courts and magistrates fines a debtor may have acquired before or after declaring bankrupt.

Child Support

Declaring bankruptcy does not negate the responsibility to pay any child support and/or welfare. Throughout and beyond the bankruptcy terms, the bankrupt party must still pay all support to the respective parties to ensure the children are not neglected. Even if you are behind on your child support payments, it is deemed too important for exemption during the bankruptcy process.

Child support is always considered to be a priority debt, allowing it an elevated status above most forms of debt which can be written off with a successful bankruptcy application.

However, bankruptcy can help debtors catch up with child support by wiping other debts and financial obligations, freeing up income to pay any outstanding or upcoming child support fees.

Visit the InControl bankruptcy page or call our dedicated customer services team on 0800 072 6623.