What Debt Does Bankruptcy Not Cover? Taxes, Support, and Fraud

Bankruptcy erases most unsecured balances, but federal law lists roughly 19 categories of debt that are not covered by a bankruptcy discharge. Some of those exceptions kick in automatically. Others only apply if a creditor files a separate action inside your case and proves their point. Either way, the debts below can survive your discharge and become collectible again the moment your case closes.¹

Child Support, Alimony, and Divorce Debts

Family support obligations are the most firmly protected category. Child support and alimony cannot be discharged in any chapter of bankruptcy.² Courts look at the actual nature of the payment rather than the label in your decree. If it functions as support for a former spouse or child, it survives, whatever the paperwork calls it. These obligations also carry first-priority status if the estate has any assets to distribute.

Property settlements from a divorce are a separate trap. Any financial obligation you took on as part of a divorce decree or separation agreement is non-dischargeable, even when it has nothing to do with support.² If your divorce required you to pay off a joint credit card or take responsibility for the mortgage, that debt looks like ordinary consumer credit but follows you through bankruptcy anyway.

Tax Debts

Some income taxes can be discharged, but only if you clear three timing hurdles. The return must have been due more than three years before you filed for bankruptcy.³ If you filed the return late, it must have been on file at least two years before the petition date.² And the tax must have been assessed more than 240 days before you filed, with tolling periods that can extend that window if you had an offer in compromise pending or were in an earlier bankruptcy.

Miss any one of those tests and the full balance stays. Extensions, amended returns, and prior offers can all shift the math in ways that are easy to get wrong without help.

Two categories of tax debt are never dischargeable no matter how old they are. Trust fund taxes — the payroll taxes an employer withholds and is supposed to send to the government — always survive. So do taxes tied to a fraudulent return or a willful attempt to evade tax.²

Student Loans

Federal and private educational loans survive bankruptcy unless you can prove that repayment would impose an “undue hardship” on you and your dependents.² That requires filing a separate lawsuit inside your bankruptcy case, called an adversary proceeding, and courts have historically set the bar high. Most federal circuits apply the Brunner test: you cannot maintain a minimal standard of living while repaying, your financial picture is likely to persist for a significant portion of the repayment period, and you made good-faith efforts to repay before filing.

The practical landscape shifted in late 2022, when the Department of Justice introduced a standardized attestation process. Borrowers fill out a form covering income, expenses, and repayment history, and DOJ attorneys evaluate whether to recommend discharge instead of automatically opposing it.⁴ The statutory standard hasn’t changed, but the government’s willingness to consent in qualifying cases has made the process more workable than it was even a few years ago. If your finances are genuinely bleak, the adversary proceeding is worth considering rather than assuming it’s hopeless.

Debts From Fraud or Dishonesty

Bankruptcy is designed for honest debtors, so debts arising from dishonest conduct get no relief. Three categories fall here: debts obtained through false pretenses or fraud, such as lying on a credit application; debts from embezzlement or breach of fiduciary duty; and debts for willful and malicious injury to another person or their property.²

These exceptions are not automatic. A creditor who thinks your debt fits one of these categories must file an adversary proceeding and prove the misconduct within the deadline the court sets. If the creditor doesn’t act in time, the debt gets discharged like any other.

The Luxury Goods Presumption

Running up charges shortly before filing carries a specific risk. Charges of more than $900 for luxury goods or services to a single creditor within 90 days of filing are presumed fraudulent. So are cash advances totaling more than $1,250 taken within 70 days of filing.² Luxury doesn’t include groceries or other goods reasonably necessary for you or your dependents. A vacation charged the month before filing is exactly what the provision targets. You can rebut the presumption, but that means litigating in bankruptcy court.

Government Fines, Restitution, and DUI Injuries

Fines and penalties owed to a government entity survive bankruptcy when they serve a punitive purpose rather than compensating a financial loss.² Criminal restitution, traffic tickets, and regulatory penalties all sit in this bucket.

Debts for death or personal injury caused by operating a vehicle, boat, or aircraft while intoxicated have their own exception and are always non-dischargeable.² Unlike the fraud exceptions, this one applies automatically. If a court determined you caused the harm while intoxicated, the judgment follows you through bankruptcy.

Debts You Fail to List

Every creditor has to appear in your bankruptcy schedules. Leave one off, and if that creditor doesn’t learn about the case in time to participate, the debt can survive the discharge.² The reasoning is basic fairness: a creditor who never got notice shouldn’t lose the right to collect.

There’s a practical wrinkle in many Chapter 7 cases. When the trustee determines there are no assets to distribute — a “no-asset case” — some courts treat an accidentally omitted creditor as unharmed, since they wouldn’t have received anything anyway. Not every court follows that approach. The safest move is to list every debt you can identify. Pull your credit reports, dig through old mail, and include balances you think are too small to matter.

Secured Debts and Liens

This is the distinction that blindsides people. A discharge eliminates your personal liability for a debt, but it does not remove a lien attached to your property.⁵ After a Chapter 7 discharge, your car lender can’t sue you personally for the balance. The lien on the car stays, though, and the lender can still repossess if you stop paying. The same rule applies to a mortgage: the discharge kills your obligation to pay, and the bank’s security interest in the house survives it.

Some liens can be dealt with inside bankruptcy. Judicial liens, such as those from a lawsuit judgment, can sometimes be removed if they impair an exemption you’re entitled to claim.⁶ Voluntary liens you agreed to when you took the loan, like a mortgage or car loan, cannot be stripped this way. Keeping secured property generally means keeping up the payments or reaffirming the debt.

Co-Signed Debts

Your discharge covers you and no one else. If someone co-signed or guaranteed a debt, your bankruptcy does nothing to release them. The creditor loses the ability to collect from you and can turn immediately to the co-signer for the full remaining balance.

Chapter 13 offers a limited exception. Filing under Chapter 13 extends the automatic stay to co-signers on consumer debts, blocking collection against them while your repayment plan is active. That protection has limits. It covers consumer debts only, not business obligations. The creditor can ask the court to lift the stay if your plan doesn’t propose to pay the co-signed debt in full, or if the co-signer actually received the benefit of the loan. And if the Chapter 13 case is dismissed or converted to Chapter 7, the co-signer protection disappears.⁷

Debts Incurred After You File

A discharge only reaches debts that existed on the day you filed the petition. Anything you take on after that date falls outside its scope. In a Chapter 7, which usually wraps up in a few months, this rarely matters. In a Chapter 13, which runs three to five years, it matters a lot. Rent, utilities, and other post-filing bills are your responsibility outside the plan. If you need to take on new credit during Chapter 13, like financing a car repair, you generally need court approval first. Unauthorized borrowing during the plan can get the case dismissed.

1
Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge
2
Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
3
Office of the Law Revision Counsel. 11 USC 507 – Priorities
4
U.S. Department of Justice. Student Loan Guidance
5
United States Courts. Discharge in Bankruptcy – Bankruptcy Basics
6
Office of the Law Revision Counsel. 11 USC 522 – Exemptions
7
Office of the Law Revision Counsel. 11 USC 1301 – Stay of Action Against Codebtor