Filing bankruptcy can get you out of debt and provide a fresh start. Many types of debt are discharged in both types of bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy. When a debt is discharged, it is wiped out, but not all debts are dischargeable.
Obtaining a Bankruptcy Discharge: What Is a Nondischargeable Debt?
If a bankruptcy petitioner has nondischargeable debt when they file Chapter 7 bankruptcy, they will still owe the debts after they receive their discharge. If a bankruptcy petitioner has nondischargeable debt when they file Chapter 13 bankruptcy, they will repay most of the nondischargeable debts in full during the bankruptcy court approved repayment plan.
Which Debts are Eligible for Chapter 7 and Chapter 13 Bankruptcy Discharge?
Many types of debt are eligible for discharge through bankruptcy. Some of the liabilities most frequently associated with overwhelming debt are included in the list of dischargeable debts, including:
- Revolving or Credit Card Debt
- Medical Bills
- Lawsuit Judgments (associated liens may not be cleared)
- Promissory Notes
- Personal Loans
- Lease Obligations
- Contractual Obligations
- Many Debts Arising from Car Accidents
Are Some Debts Only Discharged in Chapter 13 Bankruptcy?
If you have any of the following debts, you may find it more advantageous to file a Chapter 13 bankruptcy because they can only be discharged through Chapter 13:
- Marital Debts due to Divorce or a Settlement Agreement (excluding debt for ordered support)
- Debt Incurred to Pay Nondischargeable Tax Debt
- Court Fees
- HOA Fees, Condo Fees or Coop Fees
- Debts Associated with Retirement Plan Loans
- Debts that Could Not be Discharged in a Prior Bankruptcy
Common Nondischargeable Debts: What Debts are Not Discharged in Bankruptcy?
Individuals buried in debt should be aware that some debts are not dischargeable. Nondischargeable debts include some debts that are never discharged, some debts that are not discharged unless you can successfully argue that they should be due to special circumstances. Some are not discharged only when a creditor is successful in arguing that they should not be eligible for discharge.
Which Debts are Never Discharged by Bankruptcy?
- Child support
- Spousal support
- Fines, penalties, or restitution owed for breaking a law
- Certain tax debt
- Debts due to death or injury caused by the filer’s drunk driving
Under Chapter 7, additional debts are not discharged, including condo fees, coop fees, HOA fees, debts for retirement plan loans, and debts not discharged in a previous bankruptcy.
Which Debts are Not Discharged Unless You Successfully Argue a Legal Exception?
Certain debts are only discharged if you convince the court that you are an exception to rule or that you meet specific legal requirements. For instance, a bankruptcy petitioner may attempt to get a discharge of student loan debt by convincing the court that they will not be able to repay the debt. Another example is income tax debt. Bankruptcy does not discharge income taxes unless a specific amount of time has passed, and additional requirements are met.
Which Debts Are Not Discharged if a Creditor Successfully Objects?
Some dischargeable debts can become nondischargeable when a creditor successfully argues their case with the bankruptcy court. Some debts that may fall into the category include:
- Debts due to fraud
- Debts for luxury purchases ($725 or more) made within 90 days of filing
- Debts due to cash advances (of more than $1,000) within 70 days of filing
- Debts from willful or malicious acts
- Debts from embezzlement, breach of fiduciary duty, or theft
- Debts not listed on the bankruptcy petition
If you are worried about which of your debts will be discharged in bankruptcy, we can help. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Our office is the only one in the Chattanooga area with two. Please get in touch. You are in good hands with Kenneth C. Rannick P.C.