Bankruptcy wipes out most unsecured debts a person carries into the case: credit card balances, medical bills, personal loans, payday loans, and overdue utility accounts. It does not touch child support, alimony, criminal restitution, most student loans, or recent income taxes, and it leaves liens on your car and home in place even when it erases your personal obligation to pay. So the honest answer to what debts bankruptcy covers is: most of what you owe to ordinary creditors, and almost none of what you owe to your family, your victims, or the government.
Which debts are covered also depends on whether you file Chapter 7 or Chapter 13. The categories below apply to both unless noted.
Debts Bankruptcy Usually Eliminates
Unsecured debt is debt no lender can seize property for. It is the core of what a discharge wipes out. A Chapter 7 discharge covers qualifying debts that existed on your filing date; a Chapter 13 discharge covers debts handled through your repayment plan.1Office of the Law Revision Counsel. 11 USC 727 – Discharge
- Credit card balances, with narrow exceptions for very recent luxury purchases and cash advances.
- Medical bills, including hospital charges and doctor bills.
- Past-due utility accounts: electric, gas, water, and phone.
- Personal loans from banks, payday lenders, and private lenders.
Once discharged, these debts are gone permanently. The court order bars the creditor from ever trying to collect, and a creditor who ignores it can be sanctioned.2Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge One practical catch: list every qualifying debt in your bankruptcy paperwork. Debts you leave off may not be covered.
Debts That Survive Bankruptcy
Federal law carves out specific categories that cannot be discharged, regardless of chapter.3Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
Child Support and Alimony
Domestic support obligations are completely off-limits. You remain responsible for every dollar, including arrears that built up before you filed. In a Chapter 13 case, past-due support must be paid in full through the plan before other unsecured creditors receive anything, and you have to stay current on ongoing support and certify you are caught up before the court issues a final discharge.4Office of the Law Revision Counsel. 11 USC 1328 – Discharge
Criminal Restitution and Government Fines
Money ordered paid to crime victims, as well as fines and penalties owed to the government, survive bankruptcy. Those creditors can keep collecting through the usual legal channels after your case closes.3Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
Income Taxes (Sometimes)
Older income tax debt can be discharged, but only if every one of four conditions is met:
- The return was originally due at least three years before you filed, including any extensions.
- You actually filed the return at least two years before your bankruptcy filing.
- The IRS or state assessed the tax at least 240 days before you filed.
- You did not file a fraudulent return or try to evade the tax.
If the debt fails any one of these tests, it survives.5Internal Revenue Service. Declaring Bankruptcy Payroll taxes an employer withholds from employee paychecks are never dischargeable. Penalties attached to a dischargeable tax are generally treated as regular unsecured claims and can be wiped out; penalties on non-dischargeable taxes, or those tied to events within three years of filing, survive.6Internal Revenue Service. Bankruptcy Tax Guide
Student Loans
Federal and private student loans are presumed non-dischargeable. To wipe them out, you have to file a separate lawsuit inside the bankruptcy case (an adversary proceeding) and prove that repayment would impose an undue hardship on you and your dependents.3Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge This covers government-backed loans, private educational loans, and scholarship overpayments.
Courts weigh three factors: whether you currently lack the ability to repay, whether that inability is likely to continue through a significant portion of the repayment period, and whether you have made good-faith efforts to repay. In November 2022, the Department of Justice introduced a streamlined process for federal student loan discharge cases. Borrowers complete a sworn attestation detailing their finances, and DOJ attorneys apply IRS expense standards to evaluate ability to pay. When the analysis shows a borrower cannot maintain a minimal standard of living while repaying, the government may recommend a full or partial discharge instead of fighting it.7United States Bankruptcy Court. Student Loans DOJ Guidance Even with the streamlined process, undue hardship requires evidence of long-term inability to pay, not just current financial strain. If the court denies the request, the student loans remain due in full.
Debts From Fraud or Deliberate Harm
Debts you ran up through dishonesty or deliberate injury are carved out:
- Money, property, or services obtained by misrepresentation, such as inflating income on a credit application.
- Debts arising from intentional injury to another person or their property. Recklessness alone does not trigger this rule.3Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
What Happens to Car Loans, Mortgages, and Other Secured Debts
Secured debts are tied to specific property. A car loan is secured by the car; a mortgage is secured by the house. Bankruptcy can eliminate your personal obligation to repay the money, but it does not strip the lender’s lien on the property.2Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge If you stop paying after discharge, the lender can still repossess or foreclose.
You generally have three options with each secured debt:
- Surrender the property. You give it back and your personal liability for any remaining balance after sale is discharged.
- Reaffirm the debt. You sign a new agreement keeping yourself personally responsible so you can keep the property. The discharge no longer applies to that debt, so if you fall behind later, the lender can come after you for a deficiency.
- Cramdown in Chapter 13. If the collateral is worth less than you owe, the court can reduce the loan balance to the property’s replacement value: what a retail merchant would charge for similar property in similar condition. Mortgages on your primary residence are not eligible for cramdown, but a Chapter 13 plan can let you catch up on missed mortgage payments over the plan’s life while keeping the home.8Office of the Law Revision Counsel. 11 USC 506 – Determination of Secured Status
How Chapter 7 and Chapter 13 Change What Gets Covered
Chapter 7 liquidates non-exempt property through a trustee and discharges most remaining unsecured debts, usually within about four months. To qualify, your income must fall below the state median for your household size, or you have to pass a means test showing you lack enough disposable income to fund a repayment plan.9United States Courts. Discharge in Bankruptcy – Bankruptcy Basics
Chapter 13 lets you keep your property and repay some or all of your debts under a three- to five-year court-approved plan. You need regular income to qualify, and the discharge comes only after you complete all plan payments.10United States Courts. Chapter 13 – Bankruptcy Basics
Chapter 13 reaches a slightly broader set of debts than Chapter 7. A completed Chapter 13 plan can discharge certain obligations that would survive Chapter 7, including debts arising from property damage in a divorce settlement and debts for intentional damage to property.9United States Courts. Discharge in Bankruptcy – Bankruptcy Basics The non-dischargeable categories above (support, most taxes, student loans, criminal restitution, debts from fraud or willful injury to a person) remain non-dischargeable in both chapters.
How Bankruptcy Affects Cosigners
Your discharge only eliminates your personal obligation. A cosigner stays fully liable, and in a Chapter 7 case the creditor can start pursuing them for the entire balance as soon as you file.
Chapter 13 offers a limited shield. Filing triggers an automatic stay that protects cosigners on consumer debts from collection activity as long as the case is open and the plan proposes to pay the debt.11Office of the Law Revision Counsel. 11 USC 1301 – Stay of Action Against Codebtor The protection ends if your case is dismissed, converted to Chapter 7, or if the plan does not provide for full payment of the cosigned debt. If protecting a cosigner matters, Chapter 13 with a plan that fully pays the shared obligation is generally the better path.
Recent Luxury Purchases and Cash Advances
Charges totaling more than $900 to a single creditor for luxury goods or services within 90 days before filing are presumed non-dischargeable. Cash advances totaling more than $1,250 taken within 70 days of filing carry the same presumption.12Office of the Law Revision Counsel. 11 USC 104 – Adjustment of Dollar Amounts The presumption is rebuttable: the creditor does not have to prove you intended to defraud them, but you can overcome it by showing the charges were for necessities rather than luxury items. This is the main reason a card balance you expect to wipe out might not be fully discharged, so watch the 90- and 70-day windows before filing.