One of the first questions people ask when they consider bankruptcy is simple: what will I still owe when this is over? It is a reasonable question, and the answer plays a major role in deciding whether bankruptcy makes sense for your situation.
The short answer is this: bankruptcy can eliminate most of the debt that is making your life difficult right now. Credit card balances, medical bills, personal loans, and payday loans are all typically wiped out. But some debts survive bankruptcy and must still be repaid. Knowing the difference before you file puts you in a much stronger position.
Debts Bankruptcy Can Eliminate
The legal term for debt that bankruptcy wipes out is “dischargeable.” Once a debt is discharged, you are no longer legally obligated to pay it, and creditors cannot call, sue, or attempt to collect.
Credit card balances are among the most commonly discharged debts in bankruptcy. Whether you carry one card or a dozen, balances built up through normal use are typically eliminated in full through Chapter 7. Chapter 13 filers may repay a portion based on their income and assets, with the remainder discharged at the end of the repayment plan.
Medical debt is one of the most reliably dischargeable debts in bankruptcy. According to a 2019 study published in the American Journal of Public Health, 66.5 percent of all bankruptcies in the United States were tied to medical issues, including both bills and lost income from illness. Whether your bills stem from a single emergency or years of ongoing care, they are generally treated as unsecured debt and eliminated in full.
Unsecured personal loans from banks, credit unions, and online lenders are dischargeable. This includes signature loans, personal lines of credit, and installment loans not backed by collateral such as a car or house.
Payday loans are treated as unsecured debt and are fully dischargeable in bankruptcy, even if the lender holds a post-dated check or electronic payment authorization. Many payday loan lenders suggest otherwise, but this is not accurate under bankruptcy law.
Past-due balances on utility accounts, including electric, gas, and water bills, are generally dischargeable. The utility company may require a security deposit to restore or continue service, but the past-due balance itself can be wiped out.
Some federal and state income tax debt can be discharged if it meets three conditions: the return was due at least three years before you filed bankruptcy, you filed the return at least two years before filing, and the IRS assessed the tax at least 240 days before your filing date. Tax debt that does not meet all three conditions is not dischargeable.
When you file bankruptcy, you can “reject” certain unexpired leases and executory contracts, eliminating your remaining financial obligations under those agreements. Specific rules govern which contracts qualify and how rejection works in practice.
Debts Bankruptcy Cannot Eliminate
Some debts survive bankruptcy. These are called “non-dischargeable” debts, and you will still owe them after your case closes. Understanding which of your debts fall into this category is an important part of evaluating whether bankruptcy is the right move.
Student loans are generally not dischargeable unless you can demonstrate “undue hardship” through a separate court proceeding. Courts typically apply a strict multi-factor standard that is difficult to meet for most filers. Some courts have begun applying more flexible approaches in recent years, but student loans remain the most consistently non-dischargeable debt in bankruptcy.
Domestic support obligations, including child support and alimony, are never dischargeable in bankruptcy. All past-due and future amounts remain your legal obligation regardless of which chapter you file.
Income taxes that do not meet the age and filing requirements described above will survive bankruptcy. Payroll taxes, tax liens, and penalties for tax fraud also cannot be discharged.
If a creditor can prove you obtained a debt through fraud, false pretenses, or materially false financial statements, that specific debt may be ruled non-dischargeable. The creditor must file an objection during your bankruptcy case for this exception to apply.
Debts resulting from willful and malicious injury to another person or their property are not dischargeable. This typically applies to civil judgments from intentional acts such as assault.
Debts arising from personal injury or death caused by operating a vehicle while intoxicated cannot be discharged in bankruptcy, regardless of chapter.
Fines, penalties, and restitution owed to government entities as part of a criminal sentence are not dischargeable. This includes fines from court orders and obligations arising from criminal proceedings.
How Chapter 7 and Chapter 13 Handle Debt Differently
Chapter 7
Chapter 7 eliminates most dischargeable debts within three to six months. There are no ongoing payments to unsecured creditors. It is best suited for people whose income falls below the Florida median for their household size, or who pass the means test, and who do not have significant non-exempt assets.
At the end of a Chapter 7 case, eligible debts are discharged in full. You walk away owing nothing on those accounts.
Chapter 13
Chapter 13 involves a three-to-five-year repayment plan. You repay a portion of your debt based on your income, expenses, and the value of your assets. At the end of the plan, the remaining balances on eligible debts are discharged.
Chapter 13 is often the better option when you have assets to protect, are behind on a mortgage, or do not qualify for Chapter 7. It can also address certain tax obligations and other debts in ways that Chapter 7 cannot.
A Note on Secured Debts
Bankruptcy eliminates your personal liability on dischargeable debts, but it does not automatically remove liens from secured debts such as mortgages and car loans.
If you want to keep property tied to a secured loan, you will generally need to continue making payments or formally reaffirm the debt. If you surrender the property, the remaining balance is discharged and the creditor cannot pursue you for the difference, even if the sale price does not cover what you owe.
Frequently Asked Questions
Can bankruptcy eliminate all of my credit card debt?
Yes. Credit card balances are unsecured debt and are among the most commonly discharged debts in bankruptcy. Once discharged, you are no longer legally required to pay them, and creditors cannot attempt to collect.
Will bankruptcy get rid of my medical bills?
In most cases, yes. Medical debt is unsecured and is fully dischargeable in both Chapter 7 and Chapter 13 bankruptcy. This includes bills from hospitals, physicians, specialists, and other healthcare providers.
Can bankruptcy eliminate student loan debt?
Generally no. Student loans are not dischargeable in bankruptcy unless you can prove “undue hardship” through a separate legal proceeding. This is a difficult standard to meet for most filers, though some courts have begun applying a more flexible approach in recent years.
Does bankruptcy eliminate child support arrears?
No. Child support and alimony are domestic support obligations that cannot be discharged in bankruptcy. All past-due and future amounts remain your legal obligation after the case closes.
Can old tax debt be discharged in bankruptcy?
Some income tax debt can be discharged if it meets all three of the following conditions: the return was due at least three years before you filed bankruptcy, you filed the return at least two years before filing, and the IRS assessed the tax at least 240 days before your filing date. Tax debt that does not meet these conditions is not dischargeable.
What happens to my mortgage in bankruptcy?
Bankruptcy eliminates your personal liability on the mortgage if you do not reaffirm it, but the lien on the property remains. If you want to keep your home, you generally need to continue making payments. If you are behind, Chapter 13 may allow you to catch up over a three-to-five-year repayment plan.
Can bankruptcy eliminate payday loan debt?
Yes. Payday loans are treated as unsecured debt and are dischargeable in bankruptcy, even if the lender holds a post-dated check or electronic payment authorization. Many payday loan companies suggest otherwise, but this is not accurate under bankruptcy law.
What is the difference between dischargeable and non-dischargeable debt?
Dischargeable debt is debt that can be legally eliminated through bankruptcy. Once discharged, you owe nothing and creditors cannot collect. Non-dischargeable debt survives bankruptcy and must still be repaid. Common non-dischargeable debts include student loans, child support, recent tax debt, and debts obtained through fraud.
Does bankruptcy eliminate judgments from lawsuits?
It depends on what the judgment was for. Judgments based on credit card debt, personal loans, or medical bills are dischargeable. Judgments based on fraud, intentional harm, DUI injuries, or domestic support obligations are not.
How do I know which of my debts will actually be discharged?
The best way to know exactly which of your debts will and will not survive bankruptcy is to speak with a bankruptcy attorney. An attorney can review your complete debt picture, identify which debts are likely dischargeable, and recommend the chapter that gives you the best financial outcome.
