Debts You Can & Cannot Erase with Bankruptcy
by
Richard Fonfrias, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC
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)