Did you know that some debts can be wiped out when you file for Chapter 7 bankruptcy? Most debtors who file for this type of bankruptcy have the main goal of wiping out or discharging as much of their debts. However, there are some debts that fall into the categories of nondischargeable and only under extraordinary circumstances will the court allow them to become dischargeable.

How do dischargeable debts work?

When a debt is considered dischargeable, it releases the debtor of their obligations to pay and creditors are prevented from taking any collection actions against the debtor. When a debt is discharged, the debtor is not legally obliged to settle it anymore.

Most debtors hope to discharge their debts when filing a Chapter 7 bankruptcy case. However, a secured creditor may have the chance to enforce the lien to recover the secured property. In other words, there are cases when debts are nondischargeable and the debtor will still be obliged to pay them even after the case has ended. In most cases, debtors filing for Chapter 7 bankruptcy are released of their obligations of their dischargeable debts after the case has ended.

Common types of dischargeable debts:

The following are among the most common categories of debts that can be discharged if a debtor files for Chapter 7 bankruptcy:

  • Hospital and medical bills

  • Collection agency payables

  • Credit card fees including late and overdue fees

  • Personal loans from family, employers, friends, colleagues

  • Past due utility bills

  • Dishonored checks that are not based on fraudulent activity

  • Auto accident claims that do not involve drunk driving

  • Loans from veterans assistance and their overpayments

  • Overpayments from social security

  • Penalties for unpaid taxes in the past years

  • Business debts

  • Balance of repossession deficiency

  • Lawyer's fees

  • Civil court judgments that are done in good faith

  • Lease agreements rents including their past dues

Sometimes the court of law denies a Chapter 7 discharge if there are fraudulent actions by the debtor during the bankruptcy case. Among these grounds for denial for debts discharge include:

  • Hiding books or records,

  • Not providing required tax documents,

  • Hiding property to defraud creditors,  

  • And violating a court order.

Common nondischargeable debts:

There are also debts that are categorized as nondischargeable. These debts are always nondischargeable and are only ever considered for discharge under extraordinary circumstances:

  • Alimony/child/spousal debts or support;

  • Certain types of taxes;

  • Fines and penalties owed to government agencies, courts, etc.;

  • Condo or housing fees debts;

  • Debts owed to spouse or those that arose out of divorce or separation;

  • Most student loans;

  • Lawyer's fees in child custody cases;

  • Debts on some retirement plans.

If your main purpose for filing for Chapter 7 bankruptcy is discharging your debts, it is best to consult a bankruptcy lawyer to better know your chances of achieving your goal. Some debts are nondischargeable so after getting legal advice from a bankruptcy lawyer, you will know which among your debts can be discharged and then you can decide if it is worth filing for Chapter 7 bankruptcy.

Mishiyeva Law- Bankruptcy Lawyer NYC 80 Wall Street New York, NY 10005 (646) 736-6328 kmbankruptcylawyerny.com