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Bankruptcy in Brief              a service of the Moran Law Group

 

What debts can be discharged in bankruptcy?

The scope of the discharge is different in each chapter.  The Bankruptcy Code after October, 2005 makes the Chapter 13 discharge only slightly more encompassing. Other advantages of 13.

Put most simply, most unsecured debt is dischargeable.  Most secured debt survives bankruptcy as a charge on the property to which it attaches unless a court order modifies the lien or the lien is paid in Chapter 13.

Chapter 7

Chapter 13

Not dischargeable in Chapter 7 are recent taxes;  family support; debts to spouse arising from divorce; student loans ;  drunk driving judgments;  criminal fines or restitution; or debts incurred by fraud or intentional wrongdoing.   The complete list of non-dischargeable debts is found at 11 U.S.C. 523(a)  and is set out in table form  here at Discharge of debt in Chapter 7  Everything else is dischargeable:  loans, credit card debts, judgments, medical bills, old income taxes.   More on treatment of different kinds of debt in bankruptcy. Remember, liens and mortgages survive the bankruptcy:  the debtor personally has no further liability for the debt, but the lien (a charge on the asset that is the collateral)  survives as an interest in the asset.  In appropriate circumstances, liens can be avoided because they impair an exemption or because the lien doesn't really attach to any value in the collateral.    Lien avoidance.   What does the discharge mean

In Chapter 13, only family support, restitution, student loans, old taxes for which no return was filed and drunk driving judgments are non dischargeable. The rules on the dischargeability of debts incurred by fraud are now nearly the same as in Chapter 7. However, the Chapter 13 plan must provide for payment in full of priority taxes and past due support.         More on Chapter 13     Lien stripping.    More on taxes in bankruptcy.

  More on Chapter 7, Chapter 13 and frequently asked questions

More on particular debts and how they are treated in bankruptcy 

Considering bankruptcy | Bankruptcy basics | Changes to bankruptcy law