What Debt Does Bankruptcy Cover and What Doesn’t?

Bankruptcy covers most unsecured debts — credit card balances, medical bills, personal loans, payday loans, and overdue utility bills are wiped out by a discharge. It does not cover child support, alimony, criminal restitution, most student loans, recent income taxes, or debts you ran up through fraud. Whether you file Chapter 7 or Chapter 13 changes some of the edges, but the core list of what survives is set by federal law and applies either way.¹

Debts a Bankruptcy Discharge Wipes Out

Unsecured debt — money you owe that is not tied to any specific piece of property — is the main category bankruptcy eliminates. A Chapter 7 discharge cancels qualifying debts that existed on the day you filed, and a Chapter 13 discharge cancels the debts addressed by your completed repayment plan.²

Credit card balances, with narrow exceptions for very recent luxury purchases and cash advances.
Medical bills, including hospital charges and doctor bills.
Personal loans from banks, payday lenders, and private individuals.
Past-due utility bills for electric, gas, water, and phone service.
Older income tax debts that meet all the timing conditions described below.
Deficiency balances on repossessed cars or foreclosed homes after you surrender the property.

Once a debt is discharged, the court issues a permanent order barring the creditor from ever collecting on it. A creditor who calls, sues, or garnishes wages after a discharge can be sanctioned.³ To get that protection, you have to list the debt in your bankruptcy paperwork. Debts you leave off the schedules may not be covered.

Debts That Survive Bankruptcy

Some obligations are carved out of the discharge by statute. You still owe them the day after your case closes, and creditors can resume collection through the regular courts.

Child Support and Alimony

Domestic support obligations are completely non-dischargeable in both Chapter 7 and Chapter 13.¹ Every dollar of current and back support is still owed after the case ends. In a Chapter 13 plan, past-due support has to be paid in full before other unsecured creditors get anything, and you must be current on ongoing support to receive a discharge at all.⁴

Criminal Restitution and Government Fines

Money you were ordered to pay a crime victim, along with fines and penalties owed to the government, is not wiped out by bankruptcy.¹

Most Student Loans

Federal and private student loans are presumed non-dischargeable. To eliminate them, you have to file a separate lawsuit inside your bankruptcy case (an adversary proceeding) and prove that repayment would impose an undue hardship on you and your dependents.¹ Courts look at whether you currently cannot repay, whether that will persist for a significant portion of the repayment period, and whether you have made good-faith efforts to pay.

In November 2022, the Department of Justice introduced a streamlined process for federal student loan discharge requests. Borrowers complete a sworn attestation about their finances, and DOJ attorneys use IRS expense standards to decide whether to recommend a full or partial discharge instead of contesting the case.⁵ The undue hardship standard itself has not changed, and the bar remains high.

Recent Income Taxes

Older income taxes can be discharged, but only if every one of these conditions is met:

The return was originally due at least three years before you filed for bankruptcy, including extensions.
You actually filed the return at least two years before your bankruptcy case.
The tax authority assessed the tax at least 240 days before you filed.
You did not file a fraudulent return or try to evade the tax.

Fail any one test and the tax survives.⁶ Payroll taxes withheld from employee paychecks are never dischargeable. Penalties tied to a dischargeable tax generally get wiped out with the tax; penalties tied to a non-dischargeable tax, or tied to events within three years of filing, survive.⁷

Debts From Fraud or Intentional Harm

If you obtained money, property, or services by lying — for example, by inflating your income on a credit application — the creditor can ask the court to declare that specific debt non-dischargeable.¹ Debts arising from deliberate injury to another person or their property are also excepted. The harm has to be intentional; recklessness alone is not enough.

Two related presumptions target last-minute borrowing. Charges of more than $900 to a single creditor for luxury goods or services made within 90 days before filing are presumed non-dischargeable, and cash advances totaling more than $1,250 taken within 70 days of filing carry the same presumption.⁸ The presumption shifts the burden to you — you can still keep the discharge if you show the purchases covered necessities rather than luxuries.

Secured Debts: Cars, Homes, and Liens

Secured debts sit in a category of their own. Your car loan is tied to the car, and your mortgage is tied to the house. Bankruptcy can eliminate your personal obligation to repay the money, but it does not remove the lender’s lien on the property.³ If you want to keep the collateral, you have to keep paying, or the lender can repossess or foreclose after your case closes.

You generally have three options:

Surrender the property to the lender. Any deficiency balance left after the lender sells it gets discharged along with your other unsecured debts.
Reaffirm the debt by signing a new agreement that keeps you personally liable in exchange for keeping the property. This waives the discharge for that specific loan.
In Chapter 13, use a cramdown to reduce the loan balance to what the collateral is actually worth. The court values the property at its replacement cost. Cramdowns are not available on the mortgage for your primary residence.⁹

Chapter 13 also lets you catch up on missed mortgage payments over the life of the plan while keeping the home. The lien stays on the property until the loan is paid off or the home is sold.

How Chapter 7 and Chapter 13 Change the Picture

The core list of non-dischargeable debts is almost identical across the two chapters, but the mechanics differ.

Chapter 7 is a liquidation. A trustee sells any non-exempt property, distributes the proceeds, and the court discharges most remaining unsecured debts. Cases typically close in about four months. You qualify by earning less than your state’s median for your household size, or by passing a means test.¹⁰

Chapter 13 is a repayment plan. You keep your property and repay some portion of your debts over three to five years. The discharge comes at the end of the plan, typically about four years after filing. You need regular income to qualify.¹¹

Chapter 13’s discharge reaches slightly further than Chapter 7’s. Debts from property damage in a divorce settlement, and debts for willful damage to property (as opposed to willful injury to a person) can be discharged through a completed Chapter 13 plan even though they would survive a Chapter 7 case.¹⁰ The big categories — support, restitution, most student loans, recent taxes, fraud-based debts — are non-dischargeable under either chapter.

What Bankruptcy Does Not Do for Cosigners

Your discharge only erases your personal liability. If someone cosigned a debt with you, that person is still fully on the hook after your case closes, and the creditor can pursue them for the entire balance.

Chapter 13 offers a partial shield. While your case is open and your plan proposes to pay a consumer debt, an automatic stay stops creditors from collecting against your cosigner.¹² The protection ends if the case is dismissed, converted to Chapter 7, or if the plan does not fully pay the cosigned debt. Chapter 7 offers no cosigner protection at all — creditors can start collecting from the cosigner as soon as you file.

1
Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
2
Office of the Law Revision Counsel. 11 USC 727 – Discharge
3
Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge
4
Office of the Law Revision Counsel. 11 USC 1328 – Discharge
5
United States Bankruptcy Court. Student Loans DOJ Guidance
6
Internal Revenue Service. Declaring Bankruptcy
7
Internal Revenue Service. Bankruptcy Tax Guide
8
Office of the Law Revision Counsel. 11 USC 104 – Adjustment of Dollar Amounts
9
Office of the Law Revision Counsel. 11 USC 506 – Determination of Secured Status
10
United States Courts. Discharge in Bankruptcy – Bankruptcy Basics
11
United States Courts. Chapter 13 – Bankruptcy Basics
12
Office of the Law Revision Counsel. 11 USC 1301 – Stay of Action Against Codebtor