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

Bankruptcy wipes out most unsecured debts: credit card balances, medical bills, personal loans, past-due utility bills, and most civil money judgments. Chapter 7 eliminates those debts within a few months of filing. Chapter 13 discharges the same categories, plus a few extras, after you finish a three-to-five-year repayment plan. What bankruptcy will not touch is a shorter but important list: child support, alimony, most student loans, recent income taxes, criminal fines and restitution, DUI injury debts, and debts you ran up through fraud.

Debts Chapter 7 Eliminates

A Chapter 7 discharge cancels all debts that existed on your filing date, except for the categories federal law specifically protects.¹ In practice that means almost anything unsecured, where you never pledged property as collateral. The debts most people file to get rid of are:

Credit card balances, including accrued interest and late fees.
Medical and dental bills, hospital charges, and ambulance fees, regardless of amount.
Personal loans from banks, online lenders, payday lenders, or family and friends who lent without collateral.
Past-due utility balances for electricity, gas, water, and similar services.
Store credit accounts where no specific item secures the balance.
Most civil money judgments, such as a breach-of-contract ruling, as long as the underlying debt is not in one of the protected categories below.

Once the court signs the discharge order, those creditors permanently lose the legal right to collect. The order works as a federal court injunction, so any call, letter, lawsuit, or wage garnishment aimed at a discharged debt is a violation of that injunction.¹

Extra Debts Chapter 13 Can Wipe Out

Chapter 13 requires monthly payments under a court-approved plan, and in exchange the final discharge reaches a few debts Chapter 7 leaves alone.² The additions are narrow but can matter:

Property settlement debts owed to a former spouse from a divorce decree or separation agreement, other than child support or alimony. In Chapter 7 those obligations survive.
Debts 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 that would survive Chapter 7. Criminal fines and restitution stay owed under both chapters.

Plan length is set by income. If your household income is below your state’s median for a family of your size, the plan runs three years. If it is above, the plan generally runs five. No plan can go longer than five years.³

Debts Bankruptcy Cannot Erase

Federal law lists categories of debt that survive both Chapter 7 and Chapter 13, driven by policies around supporting children, deterring fraud, and preserving criminal penalties.⁴ You will still owe these after your case closes:

Child support and alimony. Domestic support obligations are fully protected from discharge under either chapter.⁴
Most federal and private student loans, unless you separately prove that repayment would impose an “undue hardship,” a standard that historically has been very difficult to meet.
Debts from fraud, such as lying on a loan application, running up charges with no intention of paying, or embezzlement. The creditor has to raise the issue and get a court ruling for the specific debt to stay owed.
Criminal restitution and criminal fines from a conviction.
Debts arising from personal injury or death caused by driving under the influence.
Many tax debts, though some older income taxes can qualify under strict timing rules described below.

When Old Income Tax Debt Can Be Discharged

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

The return must have been due at least three years before you filed for bankruptcy, counting any extensions.
You must have actually filed the return at least two years before your bankruptcy petition. Substitute returns the IRS prepared for you do not count.
The IRS must have assessed the tax at least 240 days before your filing, or not assessed it at all.

All three conditions have to be satisfied at the same time, and taxes tied to fraud or willful evasion never qualify.⁴ Trust fund taxes, meaning payroll taxes an employer withheld from employees and owes to the IRS, stay non-dischargeable no matter how old they are.

The Student Loan Attestation Process

The undue hardship standard for student loans still applies, but the process for asking has become more workable. The Department of Justice, working with the Department of Education, introduced an attestation form that lets you show your inability to repay without a full adversary trial. The DOJ looks at three factors: 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. If the answers line up, the DOJ may recommend discharge instead of fighting the request.

What Happens to Secured Debts and Liens

A discharge cancels your personal liability, but it does not remove a creditor’s lien on property. If you have a car loan or mortgage, the lender’s security interest in the vehicle or the house survives your case. The debt is gone; the lien is not. Stop paying after discharge and the lender can still repossess the car or foreclose on the home.

In Chapter 7 you usually have three choices for secured property: surrender it, reaffirm the debt and keep paying under the original terms, or redeem the property by paying its current market value in a lump sum. Chapter 13 lets you keep secured property by paying it through the plan, sometimes at a reduced balance if the collateral is worth less than you owe, a process known as a cramdown. You generally cannot cram down the mortgage on your primary residence.³

Co-Signers Are Not Covered

Your discharge protects you and no one else. In Chapter 7, creditors can turn to a co-signer or guarantor for the full balance the moment your personal liability ends. Chapter 13 gives co-signers more room: an automatic stay blocks collection against a co-signer on a consumer debt while your case is active and your plan proposes to pay that creditor. If the plan will not pay the co-signed debt in full, the creditor can ask the court to lift the stay and go after the co-signer for the rest.⁵ Anyone who signed alongside you should know this before you file.

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
Office of the Law Revision Counsel. 11 USC 1301 – Stay of Action Against Codebtor