Most debtors file for bankruptcy relief to discharge (eliminate) their debts. While many types of debts can be wiped out in both Chapter 7 and Chapter 13 bankruptcy, there are some debts that can only be discharged in Chapter 13 bankruptcy. Essentially, the Chapter 13 bankruptcy discharge is broader than the Chapter 7 discharge. Read on to learn more about which debts you can wipe out in Chapter 13 bankruptcy, but not in Chapter 7.
For more information on what happens to your debts in Chapter 13 bankruptcy, see our topic area on Your Debts in Chapter 13 Bankruptcy. For a full list of the types of debts discharged in both Chapter 7 and Chapter 13 bankruptcy, visit our Bankruptcy Discharge topic area.
Below we discuss some of the most common types of debt that you can wipe out in Chapter 13 bankruptcy but not in Chapter 7.
If you incur debts as a result of causing willful and malicious damage to someone else’s property, filing for Chapter 7 bankruptcy will not eliminate your liability to that person. But you can discharge these types of debts (to property, not to injury to a person) in Chapter 13 bankruptcy.
If you pay your nondischargeable priority tax obligations by using your credit card or otherwise taking out another debt, you can discharge that obligation in Chapter 13 bankruptcy but not in a Chapter 7.
Domestic support obligations (such as alimony and child support) are not dischargeable in Chapter 7 or Chapter 13 bankruptcy. But there are other types of debt that you can incur in a divorce or separation proceeding. If you incur a non-support obligation to your spouse or children in a divorce decree, property settlement, or separation agreement, or a similar proceeding, you may be able to wipe it out in Chapter 13 bankruptcy but not in a Chapter 7.
Example. Your divorce decree states that you are responsible for paying a joint credit card obligation you had with your former spouse. You fail to pay the balance and the credit card company collects the money from your spouse. Because you had an obligation to your spouse to pay off the card, he or she can sue you to get reimbursed. Filing for Chapter 7 bankruptcy will not discharge your obligation to your spouse, but a Chapter 13 bankruptcy can.
If the court denied your discharge in a previous bankruptcy case, you can’t eliminate those debts by filing another Chapter 7 bankruptcy. But you might be able to wipe them out by filing a Chapter 13.
If you borrow money from your retirement account, you are giving a loan to yourself. Retirement account loans are dischargeable in Chapter 13 bankruptcy.
However, it's usually of more benefit to keep paying your retirement account loans during Chapter 13 bankruptcy, rather than to discharge them. This is because the payments you make on these loans go back into your retirement account, so you are essentially paying yourself back. In addition, your retirement loan payments lower your disposable income in Chapter 13 bankruptcy and reduce the amount you have to pay back creditors.
In Chapter 7 bankruptcy, you can discharge your personal liability for homeowners association (HOA) fees that were incurred prior to your filing date. But you are responsible for any fees that come due after filing your case. (Learn about HOA dues in Chapter 7 bankruptcy.) In Chapter 13 bankruptcy, you can also discharge HOA fees you incur after your filing date.
However, be aware that the HOA will typically retain a lien on your home even if you discharge your personal liability for the debt. So you should continue paying your HOA fees if you intend to keep your home.
You can’t discharge most kinds of government fines and penalties in Chapter 7 bankruptcy. But you can typically eliminate many fines and penalties you owe to the government (other than criminal fines) by filing for Chapter 13 bankruptcy.