Debt Discharge in Bankruptcy: Nondischargeable Debts

Filing for bankruptcy is a big deal. It wipes out debt and lifts the burden of financial stress off your shoulders, which bankruptcy filers agree is a great feeling. But it won't erase all obligations. To ensure you get the "I'm debt-free" smile when your bankruptcy case ends, you'll want to know:

• whether you can erase or "discharge" all of your debts, and
• if you have a "nondischargeable" debt bankruptcy won't eliminate.

Once you know which debts you'll be able to erase, consider learning more about how bankruptcy works and other things you should know about bankruptcy. For more targeted information, try our quick ten-question bankruptcy quiz. The easy-to-understand pop-ups provide bankruptcy-related insights after each answer.

Nondischargeable Debts Don't Go Away in Bankruptcy, But Dischargeable Debts Do

One of the nice things about bankruptcy is that erasing dischargeable debt is automatic. The bankruptcy court will discharge your qualifying debts after you fulfill your chapter's bankruptcy requirements.

You can also predict what will happen to debt that doesn't go away in bankruptcy—or "nondischargeable" debt. It will depend on the bankruptcy chapter you file.

• In Chapter 7 bankruptcy, you'll pay your nondischargeable debt after the court removes the automatic stay that stops creditor collections. You'll likely owe the amount you owed before filing. However, you could owe less if the Chapter 7 trustee sold property and used the funds to pay "priority" debts, like support obligations and back taxes.

• If you choose Chapter 13 bankruptcy, you'll pay most nondischargeable debts in full in your plan. Typical exceptions include long-term obligations such as a house payment if you keep the house and student loans. Except for these two debts, most filers emerge from Chapter 13 debt-free.

The Court's Discharge Order Erases Debt in Bankruptcy

Most people assume that they'll receive a list of the debts discharged at the end of their case. But that's not what happens. Instead, the bankruptcy court uses a more straightforward approach. The "Order of Discharge" form you'll receive by mail will list debts that don't go away in bankruptcy—it won't reference any obligations listed in your bankruptcy paperwork at all.

So how does the order work?

After your case ends, if a creditor tries to collect a dischargeable debt, give the creditor the court location, case number, and discharge date listed at the top of the order. Creditors almost always stop calling because not only do they know which debts get discharged, they also know continued collection attempts could result in a fine.

You'll find links to discharge orders in the "Bankruptcy Forms" box at the end of the article.

Nondischargeable Debts—The Debts You Can't Discharge in Bankruptcy

The easiest way to explain nondischargeable debts is by showing you what you'll see on the bankruptcy court's discharge order. Have no fear—we've simplified the lists when possible.

The Chapter 7 bankruptcy discharge order lists the following nondischargeable debts:

• domestic support obligations
• student loans
• most taxes
• some unlisted or improperly listed debts
• any debt ordered not discharged (usually because of fraud or presumptive fraud)
• most fines, penalties, forfeitures, and criminal restitution obligations
• some loans owed to pension, profit-sharing, stock bonus, or retirement plans
• debts for death or personal injury caused by operating a vehicle while intoxicated, and
• debts covered by a reaffirmation agreement.

The Chapter 13 bankruptcy discharge order is slightly different—it lists the following nondischargeable debts (you can wipe out a few more things in Chapter 13):

• domestic support obligations
• most student loans
• some unlisted or improperly listed debts
• some taxes not paid in full under the plan
• any debt ordered not discharged (usually because of fraud or presumptive fraud)
• restitution or criminal fine included in a debtor's criminal conviction sentence
• long-term obligations when the final payment is due after the plan ends (usually house payments and student loans)
• most consumer purchases made after the bankruptcy filing
• civil restitution or damages awarded for personal injury or death caused by the debtor's malicious or willful acts, and
• debts for death or personal injury caused by operating a vehicle while intoxicated.

Which Debts Can I Discharge in Bankruptcy?

Bankruptcy law doesn't explain which bills can be erased in bankruptcy—it only lists nondischargeable debts. But because it's easier to wrap your head around the bills you can wipe out, we've listed the things you can almost always get rid of—your bankruptcy lawyer will help you identify any other dischargeable debts you might have.

In Chapters 7 and 13, you can eliminate:

• credit card balances
• medical and utility bills
• personal and payday loans
• promissory notes
• most car accident-related debts
• leases and contracts
• lawsuit judgments (judgment liens don't go away without a successful bankruptcy motion), and
• house, car, and other secured loans (if you return the property purchased with the loan).

If you file for Chapter 13, you can erase these debts, too:

• some civil fines and penalties
• debt incurred to pay a nondischargeable tax debt
• debts you couldn't discharge in a previous bankruptcy, and
• property settlement debts in a marital settlement agreement.

Other Bankruptcy Debt Discharge Rules

Wouldn't it be nice to stop with two lists and be done with it? Unfortunately, bankruptcy doesn't work that way. Every topic has a curveball or two that makes it difficult—if not downright impossible—to apply simple commonsense. Because of that, it's best to retain a bankruptcy lawyer when possible.

Don't let these things take you by surprise.

Some Debts Might Be Dischargeable in Bankruptcy, but Might Not

You'll remain responsible for student loans in most situations. However, filers who can convince a bankruptcy judge that they'd never be able to repay their student loans can get them discharged. You'll find student loan discharge standards here—but keep in mind that as of January 2022, reports have surfaced suggesting that some courts are beginning to take a more liberal stance on private student loan debt.

Also, the court won't discharge other debts unless you meet legal requirements. For instance, discharging income taxes won't happen until a particular amount of time has elapsed and other conditions are met.

Sometimes a Creditor Must Ask for a Nondischargeable Debt Order in Bankruptcy

Some debts get wiped out unless a creditor convinces the court that you should remain obligated to repay the debt. These debts arise from:

• willful and malicious acts
• embezzlement, larceny, or breach of fiduciary duty
• failing or incorrectly listing creditors, and
• fraud and presumptive fraud.

Presumptive fraud usually occurs when you use a credit card to purchase luxuries of more than $725 from a single creditor within 90 days of filing for bankruptcy. Presumptive fraud applies to cash advances of more than $1,000 taken from a single creditor within 70 days of filing, as well (figures are current for cases filed between April 1, 2019, and March 31, 2022).

The creditor would ask the court to find the debt nondischargeable using an adversarial proceeding in bankruptcy.

Navigating Your Bankruptcy Case

Bankruptcy is an unusual area of law because it's essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because all rules apply in every case, you can't skip a step.

The forms and resources below will help you find more information. Also, you can use this list of Chapter 7 and 13 bankruptcy forms to see where this topic falls. And this handy bankruptcy document checklist will help you gather the things you'll need to complete the petition.

Need More Info?

We want to help you find the answers you need. Go to TheBankruptcySite for more easy-to-understand bankruptcy articles, or consider buying a self-help book like The New Bankruptcy by Attorney Cara O'Neill.

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by consulting with a local bankruptcy lawyer.

Updated January 25, 2022