Does Bankruptcy Clear All Debt? What Gets Discharged

Debts That ARE Discharged in Bankruptcy

Bankruptcy eliminates most types of consumer debt. These debts are typically dischargeable in Chapter 7 and Chapter 13:

• Credit card debt: The most common debt eliminated in bankruptcy. All credit card balances are discharged.
• Medical bills: The second most common reason people file. All medical debt is dischargeable.
• Personal loans: Unsecured personal loans from banks, credit unions, and online lenders are discharged.
• Past-due utility bills: Electric, gas, water, and phone bills incurred before filing are discharged.
• Old lease obligations: Remaining lease payments after you move out or return a vehicle are dischargeable.
• Deficiency balances: If a car was repossessed or home foreclosed, the remaining balance owed is typically discharged.
• Payday loans: Payday loans and other predatory consumer debt are dischargeable.
• Civil judgments: Most money judgments from lawsuits are dischargeable (with exceptions for fraud or intentional harm).
• Business debts: Debts from a failed business (unless fraudulently incurred) are discharged in the owner's personal bankruptcy.

Debts That Are NOT Discharged

Under 11 U.S.C. Section 523, certain debts survive bankruptcy and must still be paid:

• Student loans: Not dischargeable unless you can prove "undue hardship" -- a difficult standard in most courts (Brunner test). However, recent DOJ guidance has made discharge somewhat easier in extreme cases.
• Child support and alimony: Domestic support obligations are never dischargeable. They also have the highest payment priority in Chapter 13.
• Most tax debts: Recent income taxes (returns due within 3 years of filing), fraud penalties, and trust fund taxes (employment taxes) survive bankruptcy. Older income taxes meeting the 3-2-240 rule may be dischargeable.
• Debts from fraud: If you obtained a loan through fraud, misrepresentation, or false financial statements, the creditor can challenge discharge under 523(a)(2).
• Criminal fines and restitution: Court-ordered penalties and criminal restitution are not dischargeable.
• DUI injury judgments: Debts arising from death or personal injury caused by drunk driving are nondischargeable under 523(a)(9).
• Debts from willful and malicious injury: If you intentionally harmed someone or their property, the resulting debt is nondischargeable under 523(a)(6).
• Government fines: Fines, penalties, and forfeitures payable to and for the benefit of a governmental unit are generally nondischargeable.

Chapter 7 vs Chapter 13 Discharge Differences

The scope of discharge differs between chapters:

Chapter 13 historically had a broader "super discharge" that eliminated some debts Chapter 7 could not. BAPCPA in 2005 narrowed this gap significantly, though a few minor differences remain.