What Debts Can (and Cannot) Be Discharged in Chapter 7 Bankruptcy?
Not all debts are created equal in bankruptcy. Understanding which obligations survive discharge is critical before you file. Here's a clear breakdown.
Understanding Dischargeable vs. Non-Dischargeable Debt
One of the most important things to understand before filing Chapter 7 bankruptcy is which of your debts will actually be eliminated — and which will follow you out the other side.
Debts That ARE Dischargeable
Chapter 7 typically eliminates:
- Credit card debt — This is the big one. Most people file Chapter 7 primarily to discharge credit card balances.
- Medical bills — Medical debt is fully dischargeable and is one of the leading causes of bankruptcy filings.
- Personal loans — Unsecured personal loans from banks or online lenders are dischargeable.
- Utility bills — Past-due utility balances can be discharged (though the utility may require a deposit to restore service).
- Lease obligations — Certain lease break fees and unpaid rent may be dischargeable.
- Older income tax debts — Federal income taxes that are more than 3 years old and meet additional criteria may be dischargeable.
Debts That Are NOT Dischargeable
The Bankruptcy Code specifically excludes certain debts from discharge:
- Student loans — Extremely difficult to discharge; requires proving "undue hardship" in a separate adversary proceeding.
- Child support and alimony — These domestic support obligations are never dischargeable.
- Recent tax debts — Taxes from the past 3 years generally cannot be discharged.
- Debts incurred through fraud — If a creditor can prove you obtained credit through misrepresentation, that debt may survive.
- Criminal fines and restitution — Government penalties and court-ordered restitution are not dischargeable.
- DUI-related debts — Debts arising from personal injury caused by driving under the influence are non-dischargeable.
- Debts not listed in your petition — If you forget to list a creditor, that debt may not be discharged.
The Gray Areas
Some debts fall in a middle zone and require careful analysis:
- Business debts depending on how the business was structured
- Taxes depending on the type and age
- Condo or HOA fees depending on timing
Why This Matters Before You File
Understanding your debt profile before filing helps you evaluate whether Chapter 7 makes sense for your situation. If most of your debt is non-dischargeable (like student loans), Chapter 7 may not provide the relief you need.
A free consultation can help you review your specific debts and determine whether bankruptcy is your best path forward.