Bankruptcy
Non-Dischargeable Debt
Non-dischargeable debt summary:
Filing for bankruptcy can’t eliminate non-dischargeable debts.
Non-dischargeable debt includes court-ordered debts, like domestic support or criminal fines, as well as most types of taxes and student loans.
Debts from fraud, luxury goods, or cash advance transactions shortly before filing for bankruptcy are also examples of non-dischargeable debt.
Non-Dischargeable Debt Definition and Meaning
Non-dischargeable debt is debt that can’t be wiped out (discharged) by going through bankruptcy. This means declaring bankruptcy won't make non-dischargeable debts go away. You'll still owe those debts after the bankruptcy is finished.
Common Types of Non-Dischargeable Debts
First, any debt you don't include in the bankruptcy petition is automatically non-dischargeable. If it's not in the paperwork, the court won't consider it.
Also, many types of non-consumer debt are usually considered non-dischargeable, including:
Recent tax debt and customs duties. If you owe the IRS, you can’t get rid of that debt by filing for bankruptcy unless the debt is several years old and you meet other conditions.
Domestic support obligations. This includes spousal support and child support.
Student loans. Most student loans, including both private and federal loans, are non-dischargeable unless you can prove that repaying the loans would cause undue hardship (not easy).
Fines owed to government agencies. This includes penalties and forfeitures.
Criminal and court fines. This includes criminal restitution, damages you caused during a DWI, and other court fines and penalties.
Condo and HOA fees. Debts from cooperative housing organizations, condo associations, and homeowners associations typically can’t be discharged.
Debts from retirement plans. Loans against employer-sponsored retirement plans, such as a 401(k) or a 403(b), are non-dischargeable.
On the other hand, most consumer debts are dischargeable. This generally includes credit card debt, medical bills, unsecured personal loans, payday loans, utility bills, and past-due rent, among others.
Other debts may be declared non-dischargeable by the courts
The bankruptcy court could label other types of debt non-dischargeable if the creditor objects and the judge agrees.
This includes debts from fraud or presumptive fraud. For example, providing false information on credit applications is a form of fraud.
Presumptive fraud specifically includes debt owed to a single creditor for $500 or more from luxury goods purchased within 90 days before filing for bankruptcy and cash advances of $750 or more within 70 days of filing.
If a creditor objects to a discharge, the court will hold a hearing. You'll need to prove you intended to repay the debt and didn't obtain it under false pretenses. If the court agrees with the creditor, the debt will be deemed non-dischargeable. If the court sides with you, the debt will be dischargeable. That’s not a guarantee that the court will ultimately erase the debt for you, only that the debt can stay in your bankruptcy.
The best person to advise you on bankruptcy matters is a bankruptcy attorney licensed to practice in your area.
Non-Dischargeable Debt FAQs
Can you declare bankruptcy for credit card debt?
Yes, filing bankruptcy for credit card debt is a choice you can make to get rid of credit card debt if your debts are unpayable. You can choose Chapter 7 or Chapter 13 bankruptcy.
Chapter 7 bankruptcy will typically discharge (get rid of) all your credit card debt, unless the debts were incurred as a result of fraud, if you used credit cards to purchase luxury items, or if you used the cards to pay nondischargeable debts like tax debt. You might have to give up some of the things you own.
With Chapter 13 bankruptcy, the court will require you to pay off your debts, but you can reorganize to an affordable repayment plan. After filing Chapter 13 bankruptcy, you will be given a five-year schedule to repay your debts (three years if you’re low-income). Secured debts like a home mortgage or auto loan get higher priority. Unsecured debts, which include credit card debt, are lower on the repayment priority list.
Once you complete your Chapter 13 payment plan, remaining eligible debts are forgiven.
Are there credit card debts that you can’t erase during Chapter 7 bankruptcy?
There are several cases in which you won’t be able to discharge all of your credit card debt through bankruptcy:
You used your credit card to pay a non-dischargeable cost like alimony, back taxes, or student loans.
You purchased luxury goods or services within 90 days of filing.
You misled your credit card company on your application—for instance, by overstating your income.
You purchased jewelry, furniture, an appliance, computers, electronics, or a mattress and the terms of purchase (on your receipt) require you to return the property to discharge the debt.
What happens if I never pay my student loans?
After 270 days of non-payment, federal student loans go into default status. Delinquencies can show up on your credit reports and harm your credit scores. Defaulting on federal loans can result in lawsuits or liens. Your tax refunds, social security checks and/or wages may be garnished. You may not be able to purchase real estate or obtain your school transcript. Private student loan lenders can sue you for unpaid debt. It is possible, although very difficult, to discharge student loans in bankruptcy.
Related Articles
If you’re overwhelmed by creditor phone calls, collection letters, or lawsuits, filing for bankruptcy forces your creditors to suspend collection activity. You cannot legally...
Learn about the bankruptcy options available to individuals. Bankruptcy options for individuals include Chapter 7, Chapter 13 and Chapter 11.
You may have heard the term unsecured debt and wondered what it means. Learn more about unsecured debt, secured debt, and how to manage them both.
If you’re overwhelmed by creditor phone calls, collection letters, or lawsuits, filing for bankruptcy forces your creditors to suspend collection activity. You cannot legally...
Learn about the bankruptcy options available to individuals. Bankruptcy options for individuals include Chapter 7, Chapter 13 and Chapter 11.
You may have heard the term unsecured debt and wondered what it means. Learn more about unsecured debt, secured debt, and how to manage them both.