Question: Does a bankruptcy discharge eliminate all debts?
Answer: The rules on which debts are discharged, or eliminated, are different depending on which type of bankruptcy is filed. A Chapter 13 discharge affects only those debts provided for by the plan. Additional exceptions to a Chapter 13 discharge include claims for spousal and child support; educational loans; drunk driving liabilities; criminal fines and restitution obligations; and certain long-term obligations, such as home mortgages, that extend beyond the term of the plan.
In a Chapter 7 proceeding, the following debts are not discharged:
- Debts or creditors not listed on the schedules filed at the outset of the case;
- Most student loans, unless repayment would cause the debtor and his or her dependents undue hardship;
- Recent federal, state, and local taxes;
- Child support and spousal maintenance (alimony);
- Government-imposed restitution, fines, or penalties;
- Court fees;
- Debts resulting from driving while intoxicated; and
- Debts not dischargeable in a previous bankruptcy because of the debtor’s fraud.
In addition, the following debts are not discharged if the creditor objects during the case and proves that the debt fits one of these categories:
- Debts from fraud, including certain debts for luxury goods or services incurred within sixty days before filing and certain cash advances taken within sixty days after filing;
- Debts from willful and malicious acts;
- Debts from embezzlement, larceny, or breach of fiduciary duty; and
- Debts from a divorce settlement agreement or court decree, if the debtor has the ability to pay and the detriment to the recipient would be greater than the benefit to the debtor.