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

Bankruptcy erases most unsecured balances, but federal law lists roughly 19 categories of debt that survive a discharge. The debts bankruptcy does not cover include child support and alimony, most divorce-related property settlements, many tax debts, student loans in almost all cases, debts arising from fraud or willful injury, criminal fines and restitution, injuries caused by drunk driving, debts you forgot to list, and any secured debt to the extent the creditor’s lien attaches to property you want to keep. Co-signers and post-filing debts also sit outside the discharge. Some of these exceptions apply automatically. Others only stick if a creditor files a separate action in bankruptcy court to enforce them.

Support and Divorce Obligations

Family obligations are the most firmly protected category. Child support and alimony cannot be discharged in any chapter of bankruptcy.¹ Courts look at the actual nature of what you owe rather than the label your divorce decree uses. If a payment functions as support for a former spouse or child, it survives regardless of what the agreement calls it. These obligations are also first-priority claims, so they get paid ahead of nearly all other creditors if the estate has any assets to distribute.

Property settlements are the 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.¹ If your divorce required you to pay off a joint credit card or assume the mortgage, that obligation follows you through bankruptcy. The debt looks like an ordinary credit balance, but the divorce agreement transforms it into something the discharge cannot reach.

Tax Debts

Some income taxes can be discharged, but only if you clear three hurdles. The return must have been due more than three years before you filed for bankruptcy.² If you filed the return late, it must have been filed at least two years before the bankruptcy petition date.¹ And the tax must have been assessed more than 240 days before you filed, with tolling periods that can extend that window if you previously had an offer in compromise pending or an earlier bankruptcy case.

Fail any one of those tests and the full balance stays with you. Extensions, amended returns, and prior offers in compromise make the timing arithmetic more complicated than it looks.

Two kinds of tax debts are never dischargeable regardless of age. Trust fund taxes, meaning the payroll taxes an employer withholds from employee paychecks and is supposed to remit to the government, survive bankruptcy no matter how old they are. Debts from a fraudulent return or willful tax evasion are also permanently non-dischargeable with no timing exception.¹

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.¹ The standard sounds simple, but it requires filing an adversary proceeding, which is a separate lawsuit inside your bankruptcy case, and courts have historically set the bar high.

Most federal circuits apply the Brunner test, which requires you to show that you cannot maintain a minimal standard of living while repaying, that your financial situation is likely to persist for a significant portion of the repayment period, and that you made good-faith efforts to repay before filing. The Eighth Circuit uses a broader “totality of the circumstances” approach. A few other circuits apply a mixed analysis. Where you file can affect your odds.

The Department of Justice introduced a standardized attestation process in late 2022 that has shifted practice. Borrowers fill out a form detailing income, expenses, and repayment history, and DOJ attorneys evaluate whether to recommend discharge rather than automatically opposing it.³ The statutory standard hasn’t changed, but the government’s willingness to consent to discharge in qualifying cases has made the process more accessible than it was a few years ago.

Debts From Fraud, Embezzlement, or Willful Injury

Bankruptcy is designed for honest debtors, so debts arising from dishonest conduct get no relief. Three categories are grouped here: debts obtained through false pretenses or fraud, such as lying on a credit application; debts from embezzlement or breach of fiduciary duty, which arise when someone in a position of trust diverts funds; and debts for willful and malicious injury to another person or their property.¹

These exceptions do not apply automatically. A creditor who believes your debt fits one of them must file an adversary proceeding and prove the misconduct.¹ Miss the deadline the court sets and the debt gets discharged like any other.

The Luxury Goods Presumption

Charging things up right before filing has its own rule. If you charged more than $900 in luxury goods or services to a single creditor within 90 days before your bankruptcy filing, the law presumes those charges were fraudulent. Cash advances totaling more than $1,250 taken within 70 days of filing carry the same presumption.¹ “Luxury” doesn’t include groceries or other goods reasonably necessary for you or your dependents. A vacation put on a credit card the month before filing is exactly what this provision targets. You can rebut the presumption, but doing so means litigating the issue.

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 someone for a financial loss.¹ Criminal restitution, traffic tickets, and regulatory penalties all fall into this category.

Debts for death or personal injury caused by operating a vehicle, boat, or aircraft while intoxicated are always non-dischargeable.¹ This exception does not require the injured party to file a separate action. A judgment for that kind of injury follows you regardless of bankruptcy.

Debts You Fail to List

Every creditor you owe must appear in your bankruptcy schedules. If you leave one off and that creditor doesn’t learn about the case in time to participate, their debt can survive the discharge.¹

There is a practical exception in many courts. In a Chapter 7 case where the trustee determines there are no assets to distribute (a “no-asset case”), some courts take a “no harm, no foul” approach, reasoning that the omitted creditor would not have received anything anyway. Not all courts follow this rule. Go through old mail, pull your credit reports, and list every debt you can identify. Missing one can turn a dischargeable balance into a surviving obligation.

Secured Debts and Liens on Your Property

This distinction blindsides more people than any other. A discharge eliminates your personal liability for a debt, but it does not remove a lien attached to your property.⁴ After a Chapter 7 discharge on a car loan, the lender can no longer sue you personally for the balance, but the lien on the car remains and the lender can still repossess the vehicle if you stop making payments. The same principle applies to a mortgage. The discharge wipes out your obligation to pay, but the bank’s security interest in the house survives.

You have tools for some liens. Judicial liens, such as those from a lawsuit judgment, can sometimes be removed if they impair an exemption you’re entitled to claim.⁵ Voluntary liens you agreed to when you took out a loan cannot be stripped this way. If you want to keep secured property, you generally need to keep paying for it or negotiate a reaffirmation agreement with the lender.

Debts Owed by Co-Signers

Your discharge covers only you. If someone co-signed a loan or guaranteed a debt, your bankruptcy does nothing to release them. The creditor loses the ability to collect from you but can immediately pursue the co-signer for the full remaining balance.

Chapter 13 offers one exception. When you file Chapter 13, an automatic stay extends to co-signers on consumer debts, temporarily preventing the creditor from going after them while your repayment plan is active. The protection has limits. It only covers consumer debts, 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. If the Chapter 13 case is dismissed or converted to Chapter 7, the co-signer protection disappears entirely.⁶ If a parent, spouse, or friend co-signed for you, factor their exposure into the choice of chapter.

Debts You Take On After Filing

A discharge covers only debts that existed on the day you filed. Anything you take on after that falls outside the discharge entirely. In a Chapter 7 case this rarely matters because the process usually takes a few months. In a Chapter 13 case, which runs three to five years, the risk grows. Rent, utilities, and other monthly expenses that come due after your filing date are your responsibility outside the repayment plan. If you need new credit during a Chapter 13 plan, such as financing a car repair, you generally need court approval first. Taking on unauthorized debt during a Chapter 13 case can result in dismissal.

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