What Debts Bankruptcy Wipes Out and What It Can’t Erase

Bankruptcy wipes out most unsecured debts you owe when you file — credit card balances, medical bills, personal loans, old utility bills, and most civil judgments — while leaving a protected group of obligations fully enforceable, including child support, alimony, most student loans, recent income taxes, criminal fines, and debts you incurred through fraud. Chapter 7 delivers that discharge in a few months by liquidating non-exempt assets. Chapter 13 delivers it after you finish a three-to-five-year repayment plan, and it reaches a few extra categories along the way.

What Chapter 7 Erases

A Chapter 7 discharge eliminates debts that existed on your filing date, with specific exceptions written into federal law.¹ In practice, that covers almost everything unsecured — any debt where you did not pledge property as collateral.

Credit card balances, including accrued interest and late fees.
Medical bills of any size, from hospital charges to ambulance fees.
Personal loans from banks, online lenders, payday lenders, or people you know.
Past-due utility balances for electricity, gas, water, and similar services.
Store credit accounts where no specific property secures the debt.
Most civil money judgments, such as a breach-of-contract ruling, as long as the underlying debt isn’t in one of the protected categories below.

Once the court enters the discharge order, those creditors lose the legal right to collect. The order acts as a permanent federal injunction, so any later attempt to sue you, garnish your wages, or dun you for a discharged balance violates a court order.¹

What Chapter 13 Reaches That Chapter 7 Doesn’t

Chapter 13 requires monthly payments under a court-approved plan before you receive a discharge, and the completion discharge is slightly broader.² Three extra categories can be wiped out at the end of a Chapter 13 plan that would survive Chapter 7:

Property settlement debts owed to a former spouse under a divorce decree or separation agreement, so long as they are not child support or alimony.
Debts arising from willful or malicious damage to someone else’s property. Willful or malicious acts that caused personal injury or death remain non-dischargeable even in Chapter 13.²
Certain non-criminal government fines. Criminal fines and restitution stay enforceable under both chapters.

Plan length depends on income. Below your state’s median for a household your size, the plan runs three years; above the median, it generally runs five, with five as the ceiling. Pay all unsecured claims in full sooner and you can finish early.³

Debts That Survive Either Chapter

Federal law carves out categories of debt that neither Chapter 7 nor Chapter 13 can erase.⁴ Assume you will still owe these after your case closes:

Child support and alimony. Domestic support obligations are fully protected from discharge regardless of chapter.
Most student loans, federal and private. They survive unless you separately prove that repayment would impose an “undue hardship,” a standard that historically has been very difficult to meet.
Debts obtained through fraud, including lying on a loan application, running up charges you never intended to pay, or embezzlement. If a creditor believes a specific debt falls in this category, it can ask the court to rule that debt non-dischargeable.⁵
Criminal restitution and criminal fines.
Debts for personal injury or death you caused while driving under the influence.
Many tax debts, though some older income taxes can qualify under strict rules.

When Old Income Taxes Can Actually Be Discharged

Not every tax bill is permanently stuck to you. Older federal income taxes can be wiped out if they pass three timing tests, sometimes called the 3-2-240 rule:

The return was due at least three years before you filed for bankruptcy, counting any extensions.
You actually filed that return at least two years before your petition. Substitute returns the IRS prepared for you don’t count.
The IRS assessed the tax at least 240 days before you filed, or hasn’t assessed it at all.

All three conditions must be met at the same time. Taxes tied to fraud or willful evasion never qualify.⁴ Trust fund taxes — payroll taxes an employer withheld from employees and was required to remit to the IRS — stay non-dischargeable no matter how old they get.

Student Loans and the Undue Hardship Attestation

The undue hardship standard is still the law, but the path to raising it has become more workable. The Department of Justice, in consultation with the Department of Education, now uses an attestation form that lets you present evidence of your inability to repay without full adversary-proceeding litigation. The DOJ looks at three questions: whether you currently lack the ability to repay, whether that inability is likely to continue, and whether you have made good-faith efforts to repay in the past. Meet those, and the DOJ may recommend discharge rather than fight your case.

Secured Debts: The Debt Goes, the Lien Stays

A discharge eliminates your personal liability. It does not remove a creditor’s lien on property. If you have a car loan or a mortgage, the lender’s security interest in the vehicle or home survives your bankruptcy, so the lender can still repossess the car or foreclose on the house if payments stop. The IOU is gone; the lien is not.

In Chapter 7, you generally have three choices for secured property: surrender it to the lender, reaffirm the debt and keep paying under the original terms, or redeem the property by paying its current market value in a lump sum. In Chapter 13, you can often keep secured property by paying it through the plan, and in some cases at a reduced balance when the collateral is worth less than you owe — a “cramdown.” You generally cannot reduce the principal on the mortgage covering your primary residence through a Chapter 13 plan.³

Co-Signers Aren’t Covered

Your discharge protects you and no one else. In Chapter 7, once your personal liability disappears, creditors can immediately pursue anyone who co-signed or guaranteed the debt for the full balance. Chapter 13 gives co-signers some breathing room: an automatic co-debtor stay bars collection against a co-signer on a consumer debt while your case is active and your plan proposes to pay that creditor’s claim. If your plan doesn’t fully pay the co-signed debt, the creditor can ask the court to lift the stay and collect the shortfall from the co-signer.⁶

One practical warning ties this all together. A debt only gets discharged if it appears in your bankruptcy schedules. Leave a creditor off the paperwork and that balance may follow you out of the case, even though everything else on the list is gone.

1
Office of the Law Revision Counsel. 11 USC 727 – Discharge
2
Office of the Law Revision Counsel. 11 USC 1328 – Discharge
3
United States Courts. Chapter 13 – Bankruptcy Basics
4
Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
5
Cornell University – Legal Information Institute (LII). Rule 7001 – Types of Adversary Proceedings
6
Office of the Law Revision Counsel. 11 USC 1301 – Stay of Action Against Codebtor