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Dischargeable vs. non-dischargeable debts in Chapter 7 bankruptcy

On Behalf of | Apr 25, 2023 | Bankruptcy

If your debt has become insurmountable, filing for Chapter 7 bankruptcy may be the best way for you to regain financial stability. Many people think that bankruptcy will eliminate all their debt and allow them to start fresh. While many debts are dischargeable, it is important to keep in mind that not all debt is dischargeable in bankruptcy under the U.S. Bankruptcy Code.

Dischargeable debt

Discharging a debt prevents creditors from taking action against you to recover the debt. Some of the most discharged debts in Chapter 7 bankruptcy may include:

  • Credit card debt
  • Medical bills
  • Personal loans
  • Past-due rent and utility bills
  • Personal loans from loved ones
  • Business debts

Non-dischargeable debt

Not all debts can be discharged in a Chapter 7 bankruptcy. Here are a few forms of debts that may not be eligible for discharge in a Chapter 7 bankruptcy:

  • Alimony/spousal support
  • Certain unpaid taxes (e.g., tax liens)
  • Child support
  • Debt not listed in your bankruptcy filing
  • Debts owed for injury to another person
  • HOA fees
  • 401(k) loans
  • Most student loans (e.g., federal, or private lender)
  • Secured debts (only if you keep the property)

While not all debts are discharged in Chapter 7 bankruptcy, those that are discharged can alleviate a great deal of your financial stress. Many people who go through bankruptcy work with a professional who can guide them through a course of debt relief which includes eliminating some old debts, reducing others and helping to avoid future financial problems. While this doesn’t always mean the person ends up with a completely blank slate, it can put them on better footing going forward.