Non-Dischargeable vs. Dischargeable Debt in Bankruptcy

When debt becomes overwhelming, bankruptcy becomes an option. The idea behind bankruptcy is that some of your debt is erased to allow you pay for essential life expenses or repay other debts. The key to that last sentence is “some of your debt is erased.” Not all debt is dischargeable in bankruptcy, and which debts are dischargeable may depend on what type of bankruptcy you’re filing.

So how do you know which debts will be dischargeable in bankruptcy, and how do you differentiate between dischargeable and non-dischargeable debt? Find out below.

Dischargeable Debt

The term dischargeable may seem like a bit of esoteric legalese, but it’s probably the most important part of any bankruptcy filing. Dischargeable debts are those that the bankruptcy code allows a debtor to be released from having to pay.

Dischargeable debts often include credit card debt, medical bills, rent or lease debt, utility bills, and personal loans. Once the debt has been discharged, creditors are prohibited from taking any form of collection action, including communications with the debtor (like telephone calls, letters, and personal contacts) and legal action.

Non-Dischargeable Debt

Debts that survive a bankruptcy filing, in whole or in part, will vary depending on the type of bankruptcy involved. Non-dischargeable debt under Chapter 7, 11, and 12 bankruptcy include:

  • Certain types of tax claims
  • Debts for spousal or child support or alimony
  • Debts for willful and malicious injuries to person or property
  • Debts to governmental units for fines and penalties
  • Debts for most government funded or guaranteed educational loans or benefit over-payments
  • Debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated
  • Debts not set forth by the debtor on the lists and schedules the debtor must file with the court

Chapter 13, while requiring repayment on certain debts, allows for a wider range of discharge. Debts dischargeable in Chapter 13, but not in Chapter 7, include debts for willful and malicious injury to property, those incurred to pay non-dischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings.

In addition, creditors may file an objection to the debtor’s discharge Under Chapter 7. Creditors receive a notice shortly after the case is filed and my file a complaint in the bankruptcy court contending the discharge. Under Chapter 13, however, creditors can only object to confirmation of the repayment plan, and cannot object to a specific discharge if the debtor has completed making plan payments.

For more information on whether a specific debt may be discharged in bankruptcy, talk to an experienced bankruptcy attorney.

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