Debts You Can & Cannot Erase with Bankruptcy

Here's how different debts are treated in bankruptcy:

Debts Dischargeable in Chapter 7:

  • Personal loans – such as money borrowed from friends
  • Credit cards
  • Repossession deficiencies
  • Auto accident claims
  • Health care bills
  • Judgments
  • Debts from a Business
  • Leases
  • Guaranties
  • Negligence claims
  • Tax penalties over 3 years old
  • Non priority taxes

Possibly Dischargeable in Chapter 7:

  • Willful and malicious injuries to others
  • Embezzlement
  • Fraud or dishonesty
  • Debts arising from breach of fiduciary duty

Note: Creditors must file suit promptly to contest the discharge of this claim.

Need Chapter 13 for:

Debt Limit: Disallowed for debtors with unsecured debt over $336,900 or secured debt over $1,010,650.

  • Luxury purchases on credit within 90 days of filing
  • Cash advances of over $750 within 70 days of the filing date
  • Debts for loans taken out against retirement accounts
  • Trust fund taxes
  • Child or spousal support
  • Fines, penalties, restitution
  • Accident suits involving intoxication
  • Debts not listed – see below
  • Penalties payable to the government other than tax penalties
  • Student loans
  • Debts in prior bankruptcy and debtor was denied a discharge
  • Taxes for years where return was unfiled or filed for less than 2 years
  • Taxes for which no return has been filed
  • Taxes first due within three years of the bankruptcy
  • Taxes assessed within 240 days (8 months) of the bankruptcy filing.
    "Assessed" means you did not file a return, so the IRS computed how much they think you owe