Dischargeable debts are debts that can be eliminated through bankruptcy. Though most common types of debt are dischargeable, certain obligations do survive bankruptcy.
Examples of generally dischargeable debts include, but are not limited to:
- Credit cards;
- Personal loans;
- Payday loans;
- Medical bills;
- Certain judgments
It is important to understand that bankruptcy only discharges the debtor’s personal liability for the debt and it does not automatically remove liens from property used as collateral, such as a mortgage or an automobile loan. This means the debtor must continue to pay these obligations if the debtor wants to retain the property. Otherwise, the property still can be foreclosed or repossessed after bankruptcy, the difference is just those creditors may not be able to sue the debtors personally for any deficiency balance. Often, creditors will try to get debtors to reaffirm these debts to preserve post-bankruptcy personal liability.
Certain other types of debt are generally non-dischargeable. These debts survive bankruptcy:
- Child support;
- Spousal maintenance or alimony;
- Criminal fines and restitution;
- Certain tax obligations;
- Student loans (though hardship exceptions exist);
- Debts incurred through fraud or false pretense
Child support, spousal maintenance, and tax debt generally are prioritized in bankruptcy plans which means they are paid before any non-priority unsecured creditors are paid. Though no type of bankruptcy will discharge these priority debts, debtors who owe these types of debts may find Chapter 13 bankruptcy more beneficial than Chapter 7.
For additional information about dischargeable debts or bankruptcy more generally, contact our bankruptcy attorneys for a free consultation.