The whole point of filing for bankruptcy is to give yourself a clean slate by getting out from under your debts. Whether you file for Chapter 7 or Chapter 13 bankruptcy, many types of debt will be discharged (wiped out) at the end of your case. This isn't true of all debts, however. Some debts are not discharged in bankruptcy. If you file for Chapter 7 bankruptcy, you will still owe these debts after your discharge. If you file for Chapter 13 bankruptcy, you will still owe any portion of these debts you can't pay in full through your repayment plan.
Debts That Are Discharged in Bankruptcy
These debts are discharged in bankruptcy, whether you file under Chapter 7 or Chapter 13:
- credit card debt
- medical bills
- lawsuit judgments against you
- most debts arising from car accidents
- obligations under leases and contracts
- personal loans
- promissory notes, and
- any other debt that doesn't fit into one of the nondischargeable categories, explained below.
These additional types of debts are discharged in Chapter 13 bankruptcy, but not in Chapter 7 bankruptcy:
- marital debts arising out of a divorce or settlement agreement (other than debts for support)
- debt incurred to pay a nondischargeable tax debt
- court fees
- condo, coop, and HOA fees
- debts for loans from a retirement plan, and
- debts that couldn't be discharged in a previous bankruptcy.
Debts That Are Not Discharged in Bankruptcy
There are three categories of debts that won't be discharged in your bankruptcy case. Some debts are never discharged; some are not discharged unless you can successfully argue that they should be; and some are not discharged only if a creditor successfully argues that they should not be.
Debts That Are Never Discharged
You will continue to owe these debts after your bankruptcy case is over:
- child support and alimony
- fines, penalties, and restitution you owe for breaking the law
- certain tax debts, and
- debts arising out of someone's death or injury as a result of your intoxicated driving.
If you file under Chapter 7, you will also continue to owe condo, coop, and HOA fees; debts for loans from a retirement plan; and debts you couldn't discharge under a previous bankruptcy.
Debts That Are Not Discharged Unless You Prove an Exception Applies
Certain debts will be discharged only if you ask the court to rule that it should be. In other words, the default is that these debts are not discharged, unless you convince the court otherwise:
- student loans, and
- regular income tax debt.
Debts That Are Discharged Unless A Creditor Successfully Objects
Some debts are discharged unless a creditor comes forward and convinces the court that they should not be. These debts include:
- debts arising from your fraud (this includes recent debts for luxuries of more than $650 or cash advances of more than $925 within a certain period of time before you file)
- debts arising from your willful and malicious acts
- debts arising from your embezzlement, larceny, or breach of fiduciary duty, and
- debts or creditors you don't list on your bankruptcy papers.
Getting Legal Help
If a significant portion of your debt load consists of debts in these last two categories -- debts that won't be discharged unless you can prove they should be or debts that won't be discharged if a creditor objects -- then you may want to talk to an experienced bankruptcy lawyer. A lawyer can review your situation and let you know whether you are likely to be successful in these arguments. If the debts are substantial and you have a chance to prevail, it might make economic sense to hire an attorney to argue your side in court.