Chapter 7 bankruptcy can eliminate most of your debts through discharge—but not all debts qualify. Understanding which debts can be wiped out and which survive bankruptcy helps you evaluate whether Chapter 7 will solve your specific financial problems.
What Is Discharge?
A bankruptcy discharge legally eliminates your personal liability for qualifying debts. After discharge, creditors cannot collect, sue, garnish wages, or take any action to recover discharged debts. It's the fresh start that makes bankruptcy valuable.
Discharge typically occurs about 4 months after filing Chapter 7, assuming no complications.
Debts That Are Discharged
Most unsecured debts qualify for discharge:
Credit card debt: All credit card balances, including high-interest cards, store cards, and charge accounts.
Medical bills: Hospital bills, doctor bills, ambulance charges, and other medical debt.
Personal loans: Unsecured loans from banks, credit unions, online lenders, and private parties.
Utility bills: Past-due amounts for electricity, gas, water, and other utilities.
Old judgments: Civil judgments for qualifying debts, though not all judgments discharge.
Deficiency balances: If you surrender collateral and owe more than it's worth, the deficiency is typically dischargeable.
Debts That Survive Bankruptcy
Certain debts cannot be discharged under federal law:
Most student loans: Federal and private student loans survive unless you prove "undue hardship" in a separate adversary proceeding—a very difficult standard.
Child support and alimony: Domestic support obligations are never dischargeable.
Recent taxes: Income taxes from recent years (generally less than 3 years old) and most other tax debts survive.
Criminal fines and restitution: Debts from criminal cases cannot be discharged.
DUI injury debts: Debts for death or personal injury caused by driving while intoxicated.
Fraudulent debts: Debts incurred through fraud, misrepresentation, or false financial statements.
Unlisted debts: Debts you fail to list in your bankruptcy paperwork may not be discharged.
Secured Debts
Secured debts work differently. While your personal liability may be discharged, the lien on collateral survives. For example, if you discharge a car loan, you're no longer personally liable—but the lender can still repossess the car if you don't pay.
Options for secured debts include: reaffirmation (keeping the debt and collateral), redemption (paying current value in one payment), or surrender (giving up collateral to eliminate the debt).
Taxes and Bankruptcy
Whether taxes discharge depends on several factors:
Income taxes may be dischargeable if the return was due more than 3 years ago, the return was filed more than 2 years ago, any assessment was more than 240 days ago, and there was no fraud or willful evasion.
Payroll taxes, trust fund taxes, and some other tax types are never dischargeable.
Fraudulent Debt Exceptions
Debts incurred through fraud don't discharge—but creditors must prove fraud. This includes debts from false written statements about finances, luxury goods purchases over $800 within 90 days of filing, and cash advances over $1,100 within 70 days of filing.
Creditors must file a complaint to have debts declared non-dischargeable for fraud—if they don't, the debt discharges by default.
Recent Purchases and Cash Advances
Certain recent debts are presumed fraudulent:
Consumer debts for luxury goods or services over $800 to a single creditor within 90 days of filing.
Cash advances totaling over $1,100 within 70 days of filing.
You can overcome this presumption by proving legitimate need and ability to repay when incurred—but it's better to avoid these transactions before filing.
Willful and Malicious Injury
Debts for willful and malicious injury to persons or property don't discharge. This requires intentional harm—not mere negligence. Assault, intentional property damage, and similar intentional torts may create non-dischargeable debts.
Discharge Objections
Creditors can object to discharge of specific debts by filing adversary proceedings arguing fraud, breach of fiduciary duty, or other exceptions. If creditors don't object within the deadline, their debts typically discharge even if they might have qualified for exception.
Getting Legal Help
Understanding which of your specific debts will discharge requires professional analysis. A bankruptcy attorney can evaluate your debt mix, identify potential non-dischargeable debts, and advise whether Chapter 7 will provide meaningful relief for your situation.