When it’s time to wash your hands of burdensome debt, bankruptcy is often a good bet—especially for credit card balances, personal loans, and medical bills. No matter what you do, however, some bills don’t go away—not even in bankruptcy. They’re called “nondischargeable” debts, and if you have one, you’re likely stuck with it.
Debts Incurred After You File Bankruptcy
Any debt you have before filing for bankruptcy is eliminated or "discharged" if it qualifies as a dischargeable debt. But, after you file, including while the bankruptcy case is still pending, any debts you incur remain yours.
For instance, suppose you filed for Chapter 7 bankruptcy on June 1, 2024, and on June 5, 2024, your dentist replaced a crown and sent a bill for $2,500. Once your bankruptcy is complete, you won't be responsible for any outstanding bills owed before June 1, 2024. However, you'll remain responsible for the $2,500 incurred after filing for bankruptcy, even though the bankruptcy case remains active and you haven't yet received a debt discharge.
Unsecured Priority Debts
Bankruptcy wipes out most unsecured debt but doesn’t eliminate “priority” unsecured debt, and when money is available to pay creditors, these debts also move to the head of the line and are paid before other unsecured debts. Here are some examples of unsecured priority debts.
Domestic Support Obligations
Your spousal support or child support payments aren’t dischargeable in bankruptcy. Child and spousal support is necessary for the child or former spouse to meet basic living requirements.
Money owed due to a marital property division differs from this support. Marital property debt isn't dischargeable in Chapter 7 but is dischargeable in Chapter 13. Check with your local bankruptcy lawyer for jurisdictional differences.
Income Taxes
Bankruptcy crosses lots of minds when taxes are owed. While it isn’t impossible to discharge unpaid income tax debt, meeting the requirements can be tough. Generally, you won't be able to discharge recently incurred tax debt because the tax must usually be approximately three years old.
But that's only one rule you must meet. Your bankruptcy lawyer will be in the best position to determine whether your debt qualifies for discharge. For more information, see Does Bankruptcy Clear State Tax Debt?
Other Government Debts
You can't discharge most fines and penalties owed to the government. However, other obligations, such as debt resulting from property damage or an overpayment of government benefits, are dischargeable. If you aren’t sure how a given government debt will be treated, a bankruptcy attorney can assist you.
Student Loans
Even though student loans aren’t “priority” unsecured debts, you can’t get rid of them in bankruptcy—that is, unless you can demonstrate that you have an “undue hardship.” A disability that prevents you from working can qualify as an undue hardship.
Discharging student loans in bankruptcy requires the filing of an "adversary proceeding" or bankruptcy trial. At the trial, the bankruptcy judge considers your present and future ability to pay, along with your past payment efforts, when determining whether you meet the undue hardship standard.
In recent years, the process has been streamlined with the addition of a report generated by the Department of Justice analyzing the various factors. The new process is supposed to reduce the time and costs associated with discharging student loans in bankruptcy and has facilitated over 600 discharges as of the time of writing.
Debt From Fraud, False Pretenses, and False Representation
Trying to work the system can come at a steep price. One consequence might be your debt not being discharged. The trick here is that debts resulting from fraud, including false pretenses or representation, are dischargeable unless your creditor files a lawsuit in the bankruptcy case, called an “adversary proceeding.” If you list the case in your bankruptcy matter and the creditor doesn't ask the court to declare the debt nondischargeable, the debt will be discharged in the normal course.
However, you should be aware of another simple way a creditor can turn a fraud-related debt into a nondischargeable debt in bankruptcy. Suppose the creditor sued you in state court and received a fraud judgment. The bankruptcy court will likely accept the state court judgment as proof that fraud occurred and declare the debt nondischargeable without requiring a full trial to prove fraud in the bankruptcy case.
Because of this, most bankruptcy lawyers suggest filing for bankruptcy immediately after receiving a summons and complaint in a state court case when the complaint contains fraud allegations. Allowing the state court case to go to judgment will almost certainly assure that the debt will be nondischargeable in bankruptcy.
By contrast, filing a bankruptcy case early on will force the creditor to take the matter to trial in bankruptcy court. The other reason to file early is that if you wait until the state court case is well underway, the bankruptcy court will likely agree to allow the fraud issue to be resolved in state court and accept the outcome in bankruptcy court.
Because of these issues, filing for bankruptcy early is almost always best. The exception would be if the creditor is certain to file an adversary proceeding in bankruptcy court, and the outcome would likely be worse in federal rather than state court. A bankruptcy lawyer specializing in bankruptcy litigation will be in the best position to help you make such a determination.
Learn more about debts resulting from fraud in bankruptcy.
Debts You Didn’t List in Your Asset Case
Contrary to common belief, “not including a debt in bankruptcy” isn’t an option. You must list all of your debts when you file for bankruptcy.
If your case is an asset case with money to distribute to creditors and you fail to list a debt, the omitted debt is nondischargeable. You could run into a similar problem if you don't list a debt incurred by fraud, even if money isn't available for creditors.
The only time the court might not act is if the outcome would be the same, even if you listed the debt and the creditor had notice of the bankruptcy. For instance, if money isn't available for creditors and the debt would have been discharged in all circumstances, the debt will likely remain dischargeable
To learn more, see Do I Have to Include All Debts in My Bankruptcy?
Other Nondischargeable Debts
Here are some other nondischargeable debts:
- certain property taxes
- taxes withheld from employee wages
- debts determined nondischargeable in a previous bankruptcy
- some condominium dues and fees
- loans owed to pension or retirement plans
- debts owed as a result of violating securities laws and regulations
- debts for willful and malicious injury (such as purposefully stabbing someone), and
- money owed as a result of wrongful death or personal injury to another caused by operating a car, boat, airplane, or other vehicle under the influence of alcohol or drugs.
Secured Loans
A common question potential bankruptcy filers ask is whether it’s possible to keep a house or car after filing. The answer is yes—as long as you continue to make the payments and can protect the equity with a bankruptcy exemption. Mortgages and car payments are common examples of “secured” debts.
However, sometimes secured debts are thought to be "nondischargeable" because paying what's owed is required to keep the property. But that's not the case. Mortgages, car loans, and other secured debts are routinely discharged in bankruptcy.
People sometimes consider secured debt nondischargeable because they lose property after the discharge if they don't make arrangements to pay what they owe. This occurs because of the lien given to a lender when purchasing the property. The lien gives the lender the right to recover the purchased property or "collateral" when the borrower doesn't pay as agreed, creating a secured loan.
Because filing for bankruptcy doesn't eliminate a lien voluntarily given to a creditor, if you don't arrange to pay the debt after discharging it in bankruptcy, which is automatic, the lender will use the lien rights to recover the property.
So, ultimately, secured debts are dischargeable. The real issue is that keeping the collateral requires overcoming two hurdles. You must be able to protect the equity from the Chapter 7 trustee using a bankruptcy exemption or pay the Chapter 13 trustee the equivalent of any nonexempt equity. You'll also need to ensure you're current on payments when filing for Chapter 7 or can afford to catch up on payments in Chapter 13. Your bankruptcy lawyer can explain the details.
Learn more about claims in bankruptcy.
How Filing Chapter 13 Can Help
When you file for bankruptcy, there are several chapters to choose from; your choice should depend on your needs. While Chapter 7 is quick, it rarely helps solve nondischargeable debt problems. However, Chapter 13 allows you to spread payments on nondischargeable debts over three to five years, depending on your income. This benefit allows you to force the creditor into a payment plan while remaining protected from collection actions such as bank levies and wage garnishments.
To learn more, see Choosing the Right Type of Bankruptcy: Chapter 7 or Chapter 13.