Some kinds of debts pass through bankruptcy unaffected:
Section 523 of the bankruptcy code lists the kinds of debts that cannot be discharged bankruptcy. 11 U.S.C § 523(a).
- Domestic Support Obligations and Marital Property Settlements (11 U.S.C. § 523(a)(5),11 U.S.C. § 523(a)(15),
- child support, alimony or any "domestic support obligations"
- debts you owe from a separation or divorce agreement
(prior to 2005, these debts were dischargeable... and still may be in chapter 13)
- (Note: Joe Biden co-sponsored the 2005 bankruptcy law to make sure DSO's to ex spouses and children were classified as priority creditors.)
- Income taxes that are less than 3 years overdue, and for any tax years for which you never filed a tax return (11 U.S.C. § 523(a)(1))
- Fnes, penalties, and restitutions (11 U.S.C. § 523(a)(1),(13),(14)
- Debts incurred because of "willful or malicious injury, and (11 U.S.C. § 523(a)(6))
- Student loans (in most cases) (unless you can prove “undue hardship.”) (11 U.S.C. § 523(a)(8))
- Debts obtained by fraud or false pretenses - (Intent of Debtor - Reliance by Creditor ) (11 U.S.C. § 523(a)(2))
- Credit card use with “no intent to repay.” Watch for “credit card blowout.” (11 U.S.C. § 523(a)(2)) including purchases of "luxury goods" within 90 days before filing bankruptcy (11 U.S.C. § 523(a)(2)(C))
- Debt related to drunk driving (11 U.S.C. § 523(a)(9))
- Debts incurred to pay nondischargeable taxes (11 U.S.C. § 523(a)(13),(14))
- Homeowners, Condominium and Co-op Association Fees (11 U.S.C. § 523(a)(16))
- Debts that were non-dischargeable in prior bankruptcies (11 U.S.C. § 523(a)(10))
- Reaffirmed Debt
- debts or creditors you don't list! (Don't leave any out!) (11 U.S.C. § 523(a)(3))
Commonly forgotten creditors:
- your co-signers
- loans you have co-signed for someone else
- anyone who may sue you for a car accident, business dispute, or the like
- your ex-spouse who is owed via a divorce decree or settlement agreement
See Chapter 9 of How to File For Chapter 7 Bankruptcy (Nolo, 2021, 22nd Ed.) for a complete discussion of this topic.
What Happens To Secured Debts?
If you have pledged collateral for a debt, (for example for an auto loan or mortgage) bankruptcy, the debt consists of two parts:
- an IOU that holds you personally responsible for the debt, and
- a lien on the property that stays with the property until the debt is paid.
Bankruptcy can get rid of the IOU against you, personally, but the lien on the property will remain, and the secured creditor can take action to enforce its lien. When you file, you'll be asked what you want to do with such property.
Click here for more on Secured Debts in Bankruptcy.