What Debts Can't Be Discharged In Bankruptcy? | Bankrate.com (2024)

Key takeaways

  • Loans, medical debt and credit card debt are generally all able to be discharged through bankruptcy.
  • Tax debt, alimony, spousal or child support and student loans are all typically ineligible for discharge.
  • If your debt isn't able to be discharged, it's either due to the type of bankruptcy you're pursuing or because Congress has ruled it ineligible.

Regardless of whether you’re seeking out a Chapter 7 or a Chapter 13 bankruptcy, not all debt is eligible for discharge. For example, taxes, spousal support, child support, alimony and government-backed student loans can’t be discharged in bankruptcy.

Which debts are discharged in bankruptcy?

When filing for bankruptcy, the goal is to eliminate as much debt as possible and get a fresh financial start. As part of this process, several types of debts will be discharged immediately or at the end of the bankruptcy process. Once discharged, you will no longer be required to pay the debt. This is a permanent order, and creditors cannot pursue collection.

Credit card debt

As part of Chapter 7 bankruptcy, your credit card debt is typically discharged immediately. On the other hand, Chapter 13 bankruptcy focuses on reorganizing your debts.

This often includes credit card debt, which means some credit card debt may be included in a Chapter 13 repayment plan. However, once that plan has been completed and all required debt repaid, the remainder is eligible for discharge based on your income and expenses.

Medical debt

Medical debt is an unsecured debt, meaning it is not backed by collateral. That being said, it can be discharged through a Chapter 7 bankruptcy.

Under Chapter 13 bankruptcy cases, a portion of medical debt may be included in your repayment plan. Once you’ve completed the repayment portion of your bankruptcy case, the remaining debts, including medical bankruptcy, are discharged.


Unsecured personal loans — loans not backed by collateral — and loans from friends, family or employers are eligible for discharge. Plus, 403(b) loans also qualify for discharge under both a Chapter 7 and a Chapter 13 bankruptcy.

Which debts are not discharged in bankruptcy?

Not all debts can be discharged, and the specific reasons why will depend on the type of bankruptcy being pursued. However, if your specific debt is ineligible, it’s likely that Congress has deemed it as such for public policy reasons.

Tax debt

Many types of taxes cannot be discharged in bankruptcy, including non-income tax debts. However, there are some exceptions for tax debt that meet certain qualifications.

For example, federal or state income taxes with a return due at least three years prior to filing may be eligible under Chapter 7. This three-year timeline includes any extensions you may have received on the tax payment from the state or federal government.

Spousal or child support and alimony

Money owed for spousal or child support or alimony also is not discharged in bankruptcy. You are unable to eliminate these types of legal obligations. As a result, any outstanding balance you owe for such items will still be due after your case is over.

Student loans

In most cases, student loans are not eligible for discharge. This includes federal student loans, private lender student loans and loans provided by a university.

There are a few exceptions to this. For instance, if you can never work again due to disability and can prove this, the student loans may be discharged. In addition, if you can prove that the loans cause undue hardship and that you have made every attempt to repay them, then the debt may be eligible for discharge.

However, qualifying for such a discharge is very difficult, and you must establish that paying the loan would mean you cannot maintain a minimal standard of living.

Additional debts that cannot usually be discharged through bankruptcy include fines or penalties from government agencies for breaking the law and personal injury debts resulting from a drunk driving incident. Debts from fraud, debts for items purchased within 90 days of filing, embezzlement, larceny or breach of fiduciary duty debts, and any debts or creditors left off of your bankruptcy petition are also not likely to be discharged.

Should you file for bankruptcy if it doesn’t discharge all of your debts?

Even though bankruptcy does not always discharge all of your debts, it can still be helpful to file in some cases. Bankruptcy is designed to give filers a fresh financial start. Depending on the type of bankruptcy you pursue, many of your outstanding debts will be addressed through a payment plan or paid off through liquidation of non-exempt assets.

Filing for bankruptcy, while helpful for some, can have a variety of serious and long-term implications. Not only will you see a credit score drop of up to 200 points, but the bankruptcy will stay on your credit report for years down the road. Chapter 7 filings will stay on your report for 10 years, while a Chapter 13 case will impact your report for seven years.

The bottom line

Because of the devastating effect it can have on your credit score, bankruptcy should typically be a last-resort option for resolving debt. A bankruptcy case can decrease your score by hundreds of points and remain on your profile for as long as a decade.

Before pursuing bankruptcy, consider your alternatives, like working with a credit counselor or reevaluating your budget. There are also consolidation loans for individuals with large amounts of high-interest debt.

What Debts Can't Be Discharged In Bankruptcy? | Bankrate.com (2024)


What Debts Can't Be Discharged In Bankruptcy? | Bankrate.com? ›

In order to discharge debt under Chapter 7 bankruptcy, however, non-exempt personal property of value is sold and the money earned from the sale of your items is used to repay creditors. Any remaining debt will be discharged, with the exception of student loans, child support, taxes and alimony.

What types of debts cannot be discharged through bankruptcy? ›

Debts not discharged include debts for alimony and child support, certain taxes, debts for certain educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury by the debtor to another entity or to the property of another entity, debts for death or personal ...

What are three examples of exempt assets that cannot be taken from you? ›

Exempted property in a bankruptcy can include the car you need to drive to work and to the store for food. It can include the tools you need to do your job. It can include the house in which you live, and the furniture and appliances and other household goods that make the house your home.

What is non dischargeable debt in bankruptcy? ›

What Is Nondischargeable Debt? Nondischargeable debt is a type of debt that cannot be eliminated through a bankruptcy proceeding. Such debts include, but are not limited to, most student loans; most federal, state, and local taxes; money borrowed on a credit card to pay those taxes; and child support and alimony.

Which types of bankruptcies have debt limits? ›

Bankruptcy filers interested in Chapter 13 must know the Chapter 13 debt limits to determine Chapter 13 eligibility because they can have only so much debt. The debt limits in Chapter 13 change periodically, usually increasing every three years.

Which type of debt should you generally pay off first? ›

When prioritizing paying off your debt, start with the balance that has the higher interest rate (likely your credit cards) and go from there. No matter what type of debt you'll be dealing with, though, the most important factor is that you pay your bills on time.

Can you exclude certain debt from bankruptcies? ›

Unfortunately, you cannot pick and choose which debts are included in your bankruptcy filing. Bankruptcy rules require that you include all of your creditors in your bankruptcy, even debts owed to friends, to relatives, and to creditors that you intend to pay in the future.

How do you make assets untouchable? ›

Another simple but powerful strategy is to place your assets in someone else's name, such as your spouse's. If you're sued, those spouse-controlled assets are often untouchable. WARNING: Be sure you have a great deal of trust in your spouse and your marriage before transferring ownership of assets to him or her.

Do you have to sell everything in Chapter 7? ›

Assets, like real estate, vehicles, and business-related property, are included in a Chapter 7 filing. However, not all assets under Chapter 7 are liquidated — certain assets are exempt from sale proceedings and can stay with the debtor.

What are the four types of assets a person can own? ›

While countless things can be considered assets, they don't all fall into the same class. The four main types of assets are liquid assets, illiquid assets, tangible assets and intangible assets. We'll also look at two additional types of assets that are important for businesses.

How often are bankruptcies denied? ›

“In my experience, about 15% don't even get approved. From there, they can be dismissed before the process is completed for a lot of reasons.” Why would a Chapter 7 bankruptcy be denied and how can you avoid it? Let's take a look.

What is an exception to discharge? ›

Another exception to Discharge is for fraud while acting in a fiduciary capacity, embezzlement, or larceny. Domestic obligations are not dischargeable in Bankruptcy. Damages resulting from the willful and malicious injury by the debtor of another person or his property, are also not dischargeable in Bankruptcy.

What is the biggest cause of bankruptcy? ›

Five Major Reasons for Bankruptcy

Common reasons that people file for bankruptcy include loss of income, high medical expenses, an unaffordable mortgage, spending beyond their means, or lending money to loved ones. Often, bankruptcy is a result of several of these factors combined.

Which is worse, chapter 11 or 13? ›

Chapter 11 bankruptcy is used by larger businesses and individuals whose obligations exceed the Chapter 13 bankruptcy debt limits. By contrast, Chapter 13 is often the better choice for individuals and sole proprietors.

What debts cannot be discharged in Chapter 13? ›

Debts not discharged in chapter 13 include certain long term obligations (such as a home mortgage), debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated ...

Which of the following entities are not eligible for Chapter 7 relief? ›

Corporations and LLCs Don't Qualify for a Chapter 7 Discharge. Businesses can file for bankruptcy, but it doesn't always make sense. Chapter 7 bankruptcy won't wipe out the debt of a corporation or LLC. Instead, the trustee will liquidate the company assets and distribute the funds to creditors.


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