Which Debts Can You Discharge in Chapter 7 Bankruptcy?

Before filing for bankruptcy, you'll want to know which debts are forgiven in a bankruptcy action. For instance, Chapter 7 bankruptcy covers 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.

However, 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.

Does Bankruptcy Clear All Debt?

No. Although bankruptcy erases many types of debt, not all obligations are discharged. Also, debts are treated differently depending on which of the three types of bankruptcy. Before filing, knowing which bankruptcy chapter you will file under to resolve your particular debt problem is essential.

How Much Debt Do You Need to File Chapter 7?

Bankruptcy filers aren't required to have a minimum debt amount before filing for Chapter 7 bankruptcy. However, a Chapter 7 discharge is available only every eight years, so most people don't file unless they can erase a substantial amount and don't have reason to believe they'll incur more.

Learn about multiple bankruptcy filings and when you can file again.

How Does a Chapter 7 Bankruptcy Discharge 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.

Most Chapter 7 filers receive a discharge order about four months after filing the bankruptcy petition. The bankruptcy filer's credit report will show the debt "discharged in bankruptcy" for up to ten years. However, the notation's impact on the debtor's credit score will lessen over time.

Which Debts Does Chapter 7 Discharge?

Chapter 7 filers discharge all of the following debts (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 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.

Does Chapter 7 Bankruptcy 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 suppose you don't continue to pay as agreed. In that case, 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.

Even though these debts aren't discharged in Chapter 13, most emerge from Chapter 13 utterly debt-free, except for home and student loans. Why? Because the filer must pay off most nondischargeable debts through the payment plan.

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.

How Does the Filing Date Affect Debts in Chapter 7?

Your Chapter 7 bankruptcy will discharge debts you had before filing, but not debts you incurred after filing, even if they were incurred 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.

Does Bankruptcy Clear Property Liens?

Bankruptcy automatically clears you of the responsibility to pay a mortgage, car loan, or secured debt. However, bankruptcy doesn't remove a voluntary lien, which is freely given as part of financing and allows the creditor to take property if you don't pay. So bankruptcy will automatically erase the payment contract, but not the agreement to return the property if you violate the payment contract.

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.

Keep in mind that additional lien types exist. Learn about liens in bankruptcy.

How the Three Primary Bankruptcy Types Work

Most people opt for Chapter 7 bankruptcy when available because it works the fastest, usually taking about four months to complete. It wipes out qualifying debts but doesn't help you with other issues, such as saving a home from foreclosure, a car from repossession, or paying nondischargeable debts over time.

If you need help saving a home or car or would like time to pay off a domestic support obligation, taxes, or another nondischargeable debt over time, Chapter 13's payment plan can help. Chapter 13 also discharges more debts than Chapter 7, including debts resulting from a marital property division and tax debt charged on a credit card. Many people choose this chapter when they need the help available in Chapter 13, but you might also need to file if you earn too much to qualify for Chapter 7.

Chapter 11 is a more complicated chapter used by businesses struggling to stay open and individuals with too much debt to qualify for Chapter 13. Learn more about Chapter 11 bankruptcy.

Stopping Collection Calls After Filing for Chapter 7 Bankruptcy

You can stop most creditor calls 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 made the law accessible for over fifty years? It's true, and we wholeheartedly encourage research and learning. You can find many more helpful bankruptcy articles on Nolo's bankruptcy homepage. For instance, Nolo articles will explain what bankruptcy can do, what you'll want to avoid before filing for bankruptcy, and more. Information needed to complete the official downloadable bankruptcy forms is on the Department of Justice U.S. Trustee Program website.

However, online articles and resources can't address all bankruptcy issues and aren't written with the facts of your particular case in mind. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.