Chapter 7 and non-dischargable debts

According to, personal bankruptcy filings in 2007 were less than three per thousand in all but 13 states. In 2009, only 13 states had bankruptcy filings of less than three per thousand residents. This is a staggering increase and is likely a result of difficult economic times.  Some people are confused about what debts may be discharged in a Chapter 7 bankruptcy filing.  Unfortunately, these misunderstandings often results in people filing for bankruptcy without a complete understanding of what debts are and are not discharged. Let us review those debts which are excluded from Chapter 7 bankruptcy.

  • Back taxes – if you have a tax debt regardless of whether it is municipal taxes (i.e. property or excise), state taxes (income or sales tax) or federal tax (income tax) it may not be discharged in a Chapter 7 bankruptcy.  Chapter 7 liquidation funds will be used to pay off these taxes.  Verify your own state laws regarding this as some taxes may be exempt from this ruling; some states allow taxes older than three years old to be excused
  • Student loans – if you are fresh out of school and find yourself with mountains of credit card debt as well as student loans, you may be considering bankruptcy. This may not be the answer unless your credit card debt is impossible to get out from under. Student loans that are government guaranteed are not discharged during a Chapter 7 bankruptcy filing. There may be options to include these loans in a Chapter 13 or an option to have part of the debt forgiven under dire circumstances
  • Restitution debts – if you have been sued and ordered to pay restitution on a personal injury case these debts will not be discharged in a Chapter 7 bankruptcy. This does not vary from state to state.  Chapter 7 does not allow you to discharge debts for judgments against you for personal injury or for restitution payments when someone has been injured as a result of your negligence. This applies to injuries at your home, car accident injuries you are ordered to pay for or criminal restitution. Some judgements are also not allowed to be discharged that apply to debts that have gone through the court system
  • Child Support/Alimony – if you have a court order for child support, alimony or spousal maintenance payments they may not be discharged when you file for Chapter 7 bankruptcy. This is a federal statute and is enforced in each state and commonwealth in the United States. Failure to make good on child or spousal support may also have other legal repercussions

While Chapter 7 bankruptcy can help you resolve mountains of debt, it may not be the answer for you. Before you decide to file for Chapter 7 bankruptcy protection, be sure you have a clear understanding of what debts are not discharged in a Chapter 7 bankruptcy. When you speak with an attorney, they will advise you about any debts that will remain after your bankruptcy has been discharged. While many people file on their own, discussing your particular case with an attorney may be necessary.