Which Debts Can You Discharge in Chapter 7 Bankruptcy?

Chapter 7 bankruptcy erases or "discharges" credit card balances, medical bills, past-due rent payments, payday loans, overdue cellphone and utility bills, car loan balances, and even home mortgages in as little as four months. But not all obligations go away in Chapter 7.

In this article you'll learn:

• how Chapter 7 bankruptcy clears debt
• which debts Chapter 7 will discharge
• why your filing date determines what bankruptcy covers
• which debts and liens Chapter 7 bankruptcy won't clear, and
• how to stop collection calls after bankruptcy.

Once you understand more about discharging debts in bankruptcy, you'll likely find that using Chapter 7 to eliminate debts you're struggling to pay is just what you need to get a fresh financial start.

What Is a Chapter 7 Bankruptcy Discharge and How Does It Work?

A bankruptcy discharge is an order issued by the bankruptcy court that breaks the contract between the bankruptcy filer and a creditor. Without the contract, the filer isn't legally required to pay the discharged debt, and the creditor can't take collection actions.

However, the debt won't disappear entirely. The bankruptcy filer's credit report will show the debt "discharged in bankruptcy" for up to ten years, although the notation's impact on the debtor's credit score will lessen over time.

Most Chapter 7 filers receive a discharge order about four months after filing the bankruptcy petition.

Which Debts Will Chapter 7 Bankruptcy Discharge?

Chapter 7 filers discharge all of the following debts (a Chapter 13 discharge erases a few more):

• credit card charges, including overdue and late fees
• collection agency accounts
• medical bills
• personal loans from friends, family, and employers
• past-due utility balances
• repossession deficiency balances
• most auto accident claims
• business debts
• past-due rent and money owed under lease agreements
• most civil court judgments
• old tax penalties and unpaid taxes
• most attorneys' fees
• government program overpayments, including welfare, Social Security, and veterans assistance programs.

You can use our list to get a general feel for whether you're a potential Chapter 7 candidate, but it's best to review your particular debts with a bankruptcy lawyer. Why? Because you might have dischargeable debts that don't appear above.

As much as we'd like to, we can't create a list that includes all dischargeable debts because bankruptcy law doesn't tell us the debts you can discharge. Instead, the law tells us the debts you can't erase in bankruptcy, which we cover in "Chapter 7 Bankruptcy Doesn't Clear All Debts" below.

Note about fraud and utility deposits. Any debt-related misconduct or fraud can turn a dischargeable obligation into a nondischargeable debt. Also, a utility provider can't refuse to provide service because of a bankruptcy filing but can charge a reasonable deposit to ensure future payment.

Find out about utility shut-offs and Chapter 7 bankruptcy.

Why Your Filing Date Affects the Debts Chapter 7 Bankruptcy Covers

Your Chapter 7 bankruptcy will discharge debts you had before filing but not after. Not even debts you incurred after filing but before you received your discharge. Here's how it works.

• Pre-filing debt. The bankruptcy court will discharge all qualifying "pre-petition" debt. You incur pre-petition debts before you file for bankruptcy.
• Post-filing debt. The bills you rack up after filing for Chapter 7 are considered "post-petition" debts. You'll remain responsible for paying post-petition balances, including those incurred during your bankruptcy case.

In short, the bankruptcy court discharges debts that existed before the Chapter 7 filing date. You'll have to pay for anything you get on credit after filing your petition, even bills you incur before receiving a discharge.

Example. Jessica fell behind on her electric bill, listed the balance in her Chapter 7 bankruptcy schedules, and continued to use her electric service. After receiving her Chapter 7 discharge, the energy company deleted the charges predating her bankruptcy filing and billed her for the electricity she used after her bankruptcy filing date.

Chapter 7 Bankruptcy Doesn't Clear All Debts

The discharge order won't list the debts you wiped out in Chapter 7. Instead, it will list the debts that bankruptcy law says all filers remain responsible for paying. You'll stay on the hook for the following:

• Mortgages, car loans, and other "secured" debts if you keep the property. A Chapter 7 bankruptcy wipes out mortgages, car loans, and other secured debts. But if you don't continue to pay as agreed, the lender will take back the home, car, or other collateralized property using the lender's lien rights. Below, we explain more in "Bankruptcy Doesn't Clear Most Liens on Your Property." You must also meet other requirements to avoid losing property in Chapter 7, so consider learning about keeping a home and keeping a car in bankruptcy.
• Recent income taxes, support obligations, and other "priority" debt. You must repay important priority debts even if you file for bankruptcy. Learn about spousal and child support arrearages, newer tax bills, and other priority debts you'll pay after Chapter 7.
• Debts incurred by fraud or criminal acts. A court can declare an obligation nondischargeable if a filer defrauded the creditor or engaged in another wrongful action, such as injuring or killing someone while driving under the influence. The creditor must first file a bankruptcy lawsuit or "adversary proceeding" and prove the debtor committed fraud or a qualifying wrongful act.
• Student loans. The bankruptcy court doesn't discharge student loans automatically. You'll remain responsible for paying a student loan after Chapter 7 bankruptcy unless you file an adversary proceeding and prove that repaying the debt would cause you undue hardship or meet a similar burden required by your bankruptcy court.

You'll find a more detailed list of nondischargeable debts in What Is a Bankruptcy Discharge? If you'd like more information about classifying debts in bankruptcy, consider reading Types of Creditor Claims in Bankruptcy: Secured, Unsecured & Priority.

Bankruptcy Doesn't Clear Most Liens on Your Property

Bankruptcy clears you of the responsibility to pay a mortgage, car loan, or another secured debt automatically. Bankruptcy doesn't remove a lien giving the creditor the right to take property if you don't pay.

For instance, you'll lose your car if you don't continue paying your car payment informally or sign a reaffirmation agreement. The lender can use its lien rights to repossess it during the Chapter 7 case after asking the court to lift the "automatic stay" order preventing collection efforts, or wait until the Chapter 7 case ends.

Stopping Collection Calls After Filing for Chapter 7 Bankruptcy

You can stop most creditor calls cold by providing your bankruptcy case number and filing date. Start by finding a filed bankruptcy document or notice. You should have one handy because you get copies of all mailings, even if a bankruptcy lawyer represents you. The filing date will be next to the case number at the top.

Why will this work? The creditor can use the information to verify your bankruptcy, and if the calls don't stop, the creditor will be subject to sanctions. Find out more about what happens if a creditor tries to collect a debt during your bankruptcy.

Need More Bankruptcy Help?

Did you know Nolo has been making the law easy for over fifty years? It's true—and we want to make sure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.