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CHAPTER 7: Which Debts Are Dischargeable . . . and Which Aren’t

August 11, 2014

Alex Moretsky

August 11, 2014

A major goal of most bankruptcies is the elimination of debt, i.e. freeing the debtor from personal liability. Chapter 7 bankruptcy provides individuals with the means to discharge many, but not all, types of debts. For this reason, it is important to know which debts will be discharged and which will not prior to filing for chapter 7 bankruptcy protection. Below is a catalogue of most of the common dischargeable and non-dischargeable debts.

 

Dischargeable Debts:

  1. Medical bills
  2. Unsecured business loans
  3. Leases that are rejected
  4. Credit card debt
  5. Other “open account” debt
  6. Debts in collection
  7. Past due utility bills
  8. Past due rent where individual has moved out
  9. Civil court judgments in cases where exemptions are affected
  10. Revolving credit accounts
  11. Unsecured personal loans
  12. Attorney’s fees except domestic support obligations
  13. Cash advance/payday loans
  14. Deficiency debt after foreclosure or repossession of a car
  15. Alimony/Palimony or support for spouse in void marriage
  16. Student loans only if:
    1. Undue hardship (debtor cannot maintain minimal standard of living for himself and dependents if forced to repay
    2. Circumstances exist indicating state of affairs to persist for significant portion of repayment period
    3. Debtor made good faith efforts to pay
  17. Debts not discharged in prior bankruptcy
  18. Marital property settlements
  19. Condominium and/or homeowner’s association dues.

 

Non-dischargeable Debts:

  1. Taxes
    1. Where returns have not been filed or filed within 3 years of bankruptcy filing
    2. Property taxes assessed before commencement of the case
    3. Excise taxes
    4. Taxes required to be collected or withheld by debtor (employment, trust fund, income FICA or sales tax)
  2. Debts incurred through false pretense, fraud or false financial statements
  3. Creditors not listed in filing (though non-asset cases might be excused)
  4. Domestic support obligations
  5. Damages from willful or malicious injury
  6. Fines and penalties owed to government units or purely punitive
  7. Most student loans.

Although the discharge and its fruits are not absolute or automatic in every bankruptcy case, the bankruptcy forum has become one that consumer debtors can appeal to when unable to pay debts as they become due.