Understanding which debts survive bankruptcy is critical for deciding whether to file and which chapter to choose.
Non-Dischargeable Debts
Under 11 U.S.C. Section 523(a), the following debts generally survive both Chapter 7 and Chapter 13:
- Domestic support obligations: Child support and alimony are never dischargeable in any bankruptcy chapter.
- Student loans: Dischargeable only if you file a separate adversary proceeding and prove "undue hardship" -- a difficult but not impossible standard. Recent DOJ guidance has made this somewhat easier.
- Recent tax debts: Income taxes less than 3 years old, taxes where a return was filed late or not at all, and payroll taxes are generally not dischargeable. Older income taxes that meet specific criteria can be discharged.
- Fraud debts: Debts incurred through fraud, false pretenses, or false financial statements.
- DUI injury debts: Debts from death or personal injury caused by intoxicated driving.
- Criminal restitution and fines: Court-ordered restitution and government fines or penalties.
What IS Dischargeable
The good news is that the most common consumer debts are fully dischargeable: credit card balances, medical bills, personal loans, utility arrears, old cell phone contracts, gym memberships, payday loans, judgments from lawsuits, and most other unsecured obligations. For many people, these are the debts causing the most pain.
Chapter 13 Advantage
Chapter 13 discharges a few additional debt types that Chapter 7 does not, including certain property settlement obligations from divorce and some debts from willful and malicious injury to property (not persons). This is called the "super discharge" and can be a reason to choose Chapter 13 even when Chapter 7 is available.