Consumers in California and throughout the country may be entitled to have some of their unsecured debts wiped out in bankruptcy. As a general rule, bankruptcy is available to honest debtors who are looking for a fresh start. However, there are many factors that a bankruptcy court may need to consider if debts were the result of fraud or similar activities. Specifically, debts may be not be discharged if they were accrued because of fraudulent conduct while acting as a fiduciary.
Furthermore, a judgment related to the willful injury to another person or another person’s property generally cannot be discharged. In such a scenario, it would be necessary to show that a defendant intentionally took action that would have caused an injury. If punitive damages are awarded in a case, they could be discharged in a bankruptcy depending on the circumstances in that matter.
This is because some states allow for punitive damages even if the reason for the damages doesn’t disqualify resulting debt to be discharged. Furthermore, the Bankruptcy Code is federal law, which means that a court cannot simply defer to decisions made at the state level. Therefore, any rulings made at the state level won’t automatically determine if a judgment can be discharged in a Chapter 7 bankruptcy case.
Those who are struggling to keep up with their debts may be able to have them discharged in bankruptcy. An attorney may explain which debts can be discharged and which may not be eliminated or reduced in such a case. Once a debt is eliminated, a debtor generally has no obligation to repay it.