Most debts can be discharged—permanently eliminated—in bankruptcy. Here are the exceptions.
The vast majority of debts are “discharged”—legally written off—when you file a “straight bankruptcy” Chapter 7 case.
All Debts Discharged Unless Fits an Exception
Bankruptcy law strongly states that as long as you go through the process appropriately your debts will be discharged. That includes all debts unless you have any debts that are on a limited list of the kinds of debts that are not discharged.
Debts that MAY not be Discharged vs. WILL not be Discharged
These exceptions to discharge are of two categories: 1) debts which MAY not be discharged if the creditor objects and succeeds in that objection, and 2) debts which WILL not discharged even without any objection raised by the creditor.
Creditor Must Object to Stop Discharge
In the first category, creditors can challenge your ability to discharge three kinds of debt. These debts are still discharged unless the discharge is challenged and the creditor persuades the bankruptcy court that the debt should not be discharged:
- Debts that incurred when a debtor makes a misrepresentation or committed fraud in order to get a loan or credit. This misrepresentation or fraud includes an intentional falsehood on a loan application, cash advances or use of a credit card when the debtor had no intention of paying back that credit, or any other method of deceitfully incurring a debt.
- Debts resulting from the debtor’s theft or embezzlement, and from fraud against a person to whom he or she owed loyalty in a trust relationship. These include stealing from an employer, cheating a business partner, and using duress to pressure an elderly relative to change his or her will in the debtor’s favor.
- Obligations resulting from intentionally and maliciously harming a person or business, or his or its property. This includes bodily injuries and property damage caused intentionally, such as during a domestic disturbance or bar fight. It might include injuries caused recklessly as well as intentionally.
The person or business to whom a debtor owes any of these three kinds of debts must file a formal “adversary proceeding”—a type of limited lawsuit—in the bankruptcy court, usually within 60 days of your meeting of creditors. Otherwise that debt is discharged forever along with the rest of the debts.
Debt Not Discharged Even Without Objection
In this second category, creditors do not need to object (and virtually never do) for the following types of debts, which are still not discharged:
- Criminal fines, fees, and restitution
- Income taxes, and other forms of taxes, IF they meet certain conditions
- Child support, spousal support and maintenance
- Most, but not all, student loans
- Claims for bodily injury or death from driving a vehicle, boat, or aircraft while intoxicated
- Debts not listed in your bankruptcy schedules, under certain conditions