Chapter 7 bankruptcy wipes out (discharges) many types of debts, including credit card debt, medical bills, and lawsuit judgments. However, not every debt can be discharged in Chapter 7 bankruptcy. Certain debts -- called nondischargeable debts -- survive Chapter 7; in other words, you will still owe them in full after bankruptcy. This article discusses some of the most common types of debts that are not discharged in Chapter 7.
Child Support and Alimony
Among the debts that aren't discharged are child support and spousal support. These debts will proceed as if your bankruptcy case never took place: If you pay child support through a wage garnishment, for example, that money will continue to be withheld and sent to the child's other parent throughout your bankruptcy case. Although the automatic stay, which goes into effect as soon as you file for bankruptcy, stops almost all debt collection proceedings for the duration of your bankruptcy case, it doesn't apply to efforts to set and collect child support and alimony.
Many types of tax debts survive Chapter 7 bankruptcy. These include most debt for regular income taxes, property taxes, and business taxes.
You cannot discharge any debt relating to criminal activity such as fines, restitution, or penalties. You also may not discharge debt arising from someone's death or personal injury as a result of your intoxicated driving.
Student loans survive Chapter 7 bankruptcy in all but the most extreme cases. These loans include government and private student loans. You may qualify for discharge of student loan debt if you can prove that repayment would be an undue hardship. Courts define this term very strictly, and seldom grant a discharge of student loan debt.
Debts Arising From Fraud
If a creditor can prove that you acted with intentional fraud in incurring a debt (for example, by writing a check against insufficient funds or taking out a loan you had no intention to repay), the debt will not be discharged. A debt will also not be discharged if you made a false statement about your finances, with the intent to deceive a creditor into lending the money -- and it worked. Recent debts for luxuries -- defined as more than $550 in debt to any one creditor for luxury goods or services within 90 days before you filed for bankruptcy -- won't be discharged. Neither will recent cash advances, defined as more than $825 from one creditor within the 70 days before you file for bankruptcy. In both these latter situations, the law presumes that you spent or borrowed the money knowing that you wouldn't repay it.
Debts You Don't List in Your Case
Debts you don't list in your paperwork won't be discharged unless:
- the creditor knew or should have know about your bankruptcy through other means (such as a phone call from you), or
- yours was a "no asset" case. In other words, you had no nonexempt property, so none of your creditors received anything in the case. In this situation, as long as the debt is otherwise dischargeable, it will be discharged even if you failed to list the creditor in your paperwork.