What Debts Can Be Discharged in Bankruptcy, and Which Ones Typically Cannot?

Many people believe that when you file for bankruptcy, all your debts simply vanish. That’s not quite how it goes. Bankruptcy is a legal procedure to assist individuals who are unable to pay their debt. It provides a way for them to either start anew or reorganize what they owe. But not all debt earns a clean slate.

So What Debts Can Actually Be Wiped Away?

Let’s start with credit card debt. This is probably the most common type of debt people bring into bankruptcy. If you're behind on payments, buried under high-interest rates, or trying to dig out of years of minimum payments, Chapter 7 bankruptcy can offer some relief. In many cases, credit card balances are completely discharged. This applies to store cards too, not just traditional credit cards.

Medical bills are also generally dischargeable. That comes as a huge relief for people who’ve been through unexpected surgeries, long-term treatments, or ER visits. In the United States, a single hospital stay can lead to tens of thousands in medical expenses. Bankruptcy helps people move forward without those costs trailing them for years.

Then there are personal loans. Whether it's a bank loan or money borrowed from a lending platform, these are usually unsecured debts. That means there's no collateral tied to them. As long as there’s no fraud involved, they can often be discharged. Past-due utility bills can also be wiped out. If you’ve fallen behind on your electric, gas, or water payments, those debts may be eliminated. That said, the utility company might require a deposit before reconnecting service if it was shut off.

Another example is overdue rent. If you owe money to a landlord from a previous lease, that unpaid rent can typically be included in the discharge. However, you won’t be able to discharge future rent owed under a lease you’re trying to keep. Business debts may also be covered. If you're a sole proprietor, debts related to your business are often considered personal debts. That means they can be discharged, especially under Chapter 7.

There’s also something people don’t talk about enough: overpayments from government programs like unemployment or SNAP benefits. If you were accidentally overpaid and the government asked for it back, those balances can be cleared in some bankruptcy cases, especially if the mistake wasn’t your fault.

Now let’s turn to back taxes. This one’s tricky. New tax debts are generally not dischargeable. However, circumstances do exist in which old income tax debt can be erased. Some conditions must be met: the taxes are income taxes, they’re at least three years old and filed on time (or within two years of filing for bankruptcy), and there is no fraud. If those boxes are checked, bankruptcy could be the answer.

Some court decisions may be erased, too. So, for example, let’s say a creditor sued you about a credit card debt and won the case and then got a judgment. That judgment alone doesn’t mean that the debt is nondischargeable. If the underlying debt was dischargeable, usually the judgment is too.

Doing so does not necessarily mean that these debts will instantly vanish from your record. The process takes time. Some creditors may object. Some debts can be partially paid if you file under Chapter 13 rather than Chapter 7. It is best to speak with a lawyer who specializes in this area to find out how the law would apply in your unique situation.

Which Debts Cannot Be Discharged?

Not everything goes away in bankruptcy, so let's look at the other side of the equation. Let’s start with student loans. You’d have to prove “undue hardship,” and that’s not easy. It usually requires showing that repaying the loans would make it nearly impossible for you to maintain even a basic standard of living. Some courts use a strict test for that, others are slightly more lenient. Recently, there’s been some movement on this issue. Certain cases have seen student debt discharged, especially with private loans or special circumstances. But as a rule, expect these debts to remain unless you specifically fight for their discharge, and win.

Child support and alimony are never dischargeable. If you owe money to support your children or a former spouse, those obligations continue no matter what. The family court system enforces these payments with serious penalties for falling behind, and bankruptcy doesn’t override that.

Then there’s recent tax debt. Unlike older tax bills, newer ones are off-limits. If you owe income tax from the last couple of years, you’ll still owe it after bankruptcy. The same goes for payroll taxes and any taxes you were supposed to collect from others, like sales tax. These are considered priority debts.

Fines and penalties owed to the government also don’t disappear. If you got a speeding ticket, failed to pay a court fine, or were ordered to pay restitution as part of a criminal case, bankruptcy won’t touch that. Even if you think the amount is unfair, the bankruptcy court can’t discharge it.

Debts related to fraud also stays with you. If you lied on a credit application or committed fraud to get money or services, the court can refuse to discharge that debt. Creditors can file a complaint asking the court to block the discharge. If they can show you acted dishonestly, the debt sticks.

Luxury purchases or cash advances made shortly before filing can also raise red flags. If you ran up your credit cards in the weeks leading up to bankruptcy, the court might consider that abuse. Creditors can object, and you could be held responsible for those debts even after everything else is cleared.

Mortgage debt is a different story. If you file for Chapter 7 and want to walk away from your house, the mortgage debt can be discharged. But if you want to keep your home, you’ll have to stay current on payments. Bankruptcy won’t erase your obligation to pay the mortgage if you plan to keep the property.

The same goes for car loans. If you want to keep the vehicle, you must keep paying. If you choose to surrender the car, then the remaining loan balance can often be discharged. But it depends on how the bankruptcy is structured and what you agree to during the case.

Some debts come with co-signers. Let’s say your parent or spouse helped you get a loan. In Chapter 7, your responsibility may be discharged, but the co-signer may still be on the hook. In Chapter 13, there’s a better chance the co-signer is protected, but it’s not guaranteed.

Navigating Your Options With Legal Support

An experienced bankruptcy lawyer can help you look at the big picture. They’ll ask the right questions, review your full financial situation, and help you understand whether Chapter 7 or Chapter 13 makes more sense. They’ll also help you figure out what debts you can expect to have discharged and which ones you’ll still need to deal with.

A good lawyer also helps with timing. Filing too early or too late can affect your outcome. For example, if you’re expecting a large tax refund or just got a raise, that could impact your eligibility for Chapter 7. If you're facing a lawsuit or wage garnishment, moving too slowly could hurt your position.

If you’re considering bankruptcy in your region, working with a Long Island bankruptcy attorney helps ensure you get local insight with real legal backing. It’s not about just checking a box. It’s about making the smartest move possible for your financial recovery.