What Debts Can’t Be Erased in Bankruptcy? Complete Guide

Bankruptcy offers real debt relief when you’re struggling financially. But not every debt gets the same treatment under bankruptcy law.

You can eliminate credit card debt, medical bills, and personal loans. But certain debts stick around even after bankruptcy.

Some debts survive bankruptcy no matter what. These include recent income taxes, child support, alimony, and debts from illegal acts.

Student loans are different. You can discharge them in Chapter 7 or Chapter 13 bankruptcy. You must prove repaying causes undue hardship and show good faith payment efforts.

Non-Dischargeable Debts in Bankruptcy

Non-dischargeable debts won’t be erased in bankruptcy. You must continue paying these debts during and after bankruptcy proceedings.

Common debts that survive bankruptcy include:

• Recent income taxes: Most taxes from the past few years aren’t dischargeable. Older taxes might qualify depending on filing dates and other factors.
• Child support and alimony: Domestic support obligations never disappear in bankruptcy. These are priority unsecured claims.
• Student loans: Not automatically discharged. You must file an adversary proceeding and prove undue hardship.
• Debts from fraud: If a creditor proves you obtained money through dishonest means, that debt survives.
• DUI personal injury debts: Debts from harm caused while driving intoxicated typically remain.
• Court fines and criminal restitution: Criminal penalties and court-ordered restitution can’t be eliminated.
• Unlisted debts: Debts you forget to list might not get discharged, especially in Chapter 7.

The type of bankruptcy you file matters. Chapter 7 and Chapter 13 treat certain debts differently. Some debts that survive Chapter 7 can be discharged in Chapter 13.

Can You Eliminate Tax Debts?

Back tax debts might not disappear in bankruptcy. The age of the debt determines eligibility.

Income tax debts become dischargeable after a certain time period. You must meet three criteria:

• The tax debt must be at least three years old. The tax return must have been due more than three years before filing.
• The tax return must have been filed at least two years ago. Late returns must be filed more than two years before bankruptcy.
• The IRS must have assessed the tax at least 240 days before filing. Assessment occurs when the IRS officially records the liability.

If your tax debt meets all three conditions, it may be discharged. The exception is when the IRS files a tax lien on your property. Tax liens convert income tax debt into secured debt that survives bankruptcy.

Can You Discharge Child Support?

No. Child support and alimony can’t be discharged in Chapter 7 or Chapter 13. Current and past-due payments both remain.

The automatic stay suspends most debt payments when you file bankruptcy. But domestic support obligations continue during and after bankruptcy.

Divorce decree debts that aren’t support payments can be discharged in Chapter 13 bankruptcy. Property settlement debts may qualify for discharge.

Student Loans in Bankruptcy

Federal student loan debt can be discharged if you meet eligibility requirements. You need the right evidence to prove your case.

Student loans get treated differently than credit card debt. You must take an additional step to have your loans reviewed.

File an adversary proceeding and complete an attestation form. Compile evidence proving your statements on the form. The court evaluates whether repaying causes “undue hardship.”

Meeting the undue hardship standard is key to discharging student loans. Speak with a bankruptcy attorney for free to assess your eligibility.

Debts From Bad Acts

Debts from certain bad acts can’t be erased in bankruptcy. These include:

• Embezzlement
• Larceny
• Personal injury from driving while intoxicated
• Willful and malicious injury to people or property (may be dischargeable in Chapter 13)

You can file bankruptcy multiple times in your lifetime. But debts you intentionally omitted in a previous case won’t be dischargeable now.

Secured Debts Like Mortgages and Car Loans

Secured debt creates confusion in bankruptcy. Many assume it’s non-dischargeable. That’s not technically true.

Your personal obligation to pay secured debt gets discharged. But keeping the property requires payment.

You can’t eliminate the car loan and keep the car. But you can negotiate to keep your vehicle or home. Sign a reaffirmation agreement and get bankruptcy court approval.

What Debts Can Be Discharged?

Bankruptcy wipes out most unsecured debt, giving you a fresh start. Dischargeable debts include:

• Credit card debt: Unpaid balances, late fees, and interest charges
• Medical bills: Most medical debt qualifies regardless of amount or age
• Personal loans: Bank loans, credit union loans, payday loans, and personal loans
• Utility bills: Past-due gas, electric, water, or phone bills
• Past rent: Money owed to former landlords after moving out
• Old service bills: Cellphone and cable bills are generally dischargeable
• Business debts: Personally guaranteed business loans and failed business debts
• Repossession balances: Deficiency balances after car repossession
• Civil judgments: Court judgments for unpaid debts (unless involving fraud)

Is All Credit Card Debt Dischargeable?

Most credit card debt can be wiped out because it’s unsecured. But how you used cards before filing matters.

Cards used for basic needs like food, gas, or bills are usually dischargeable. But running up charges before filing raises red flags.

Spending $725 or more on luxury or nonessential purchases causes problems. That debt may not be forgiven.

Many people use credit cards to survive. That’s acceptable. Just avoid big or unnecessary purchases before filing.

Chapter 7 vs Chapter 13 Bankruptcy

Two common bankruptcy types exist for individuals and couples. Chapter 7 and Chapter 13 each work differently.

Both erase credit card debt, medical bills, and personal loans. These are unsecured debts with no property backing them up.

Filing your bankruptcy petition triggers the automatic stay. All debt collection must stop immediately. Collectors can’t call you. Repossession stops. Wage and bank account garnishments end.

Successful bankruptcy cases end with a discharge order. The bankruptcy judge wipes out all eligible debt. You don’t pay back discharged debt.

Chapter 7 and Chapter 13 both end in discharge and a fresh start. But each follows a different path:

• Chapter 13: You create a 3-5 year repayment plan. Monthly payments go to the bankruptcy trustee until the plan ends. Payments are calculated from monthly income minus allowable expenses.
• Chapter 7: Cases move much faster. Most complete within six months because no repayment plan exists.

Which Bankruptcy Type Should You Choose?

Evaluate the pros and cons before filing. Consider your specific situation carefully.

Filers with property to protect often prefer Chapter 13. Those with non-dischargeable debts may also favor Chapter 13. You can include non-dischargeable debt in the repayment plan.

Speak with a bankruptcy attorney for free to determine which chapter fits your needs. An attorney can review your debts and recommend the best option.