What Are the Differences Between Dischargeable and Nondischargeable Debts in Bankruptcy?

Updated by , Attorney · University of the Pacific McGeorge School of Law

Most people seek bankruptcy relief to wipe out their debts and get a fresh start. While you can eliminate many debts in bankruptcy, certain obligations called "nondischargeable debts" survive your bankruptcy discharge. Read on to learn more about the differences between dischargeable and nondischargeable debts and how they are treated in bankruptcy.

What Are Dischargeable Debts?

Dischargeable debts are obligations that can be wiped out by your bankruptcy discharge, the order that eliminates debts at the end of your case. When you receive your discharge, you are no longer obligated to pay discharged debts and creditors cannot come after you to collect them.

Commonly discharged debts include credit card balances, medical bills, personal loans made by friends, family, and others, and past-due utility bills. For more, see Which Debts Are Discharged in Chapter 7 Bankruptcy?

Timing and Debt Dischargeability

If a bill comes due after you file for bankruptcy, you might wonder whether the balance will go away. It's common to be confused about whether ongoing accounts, such as utility bills, get completely wiped out at the end of the case or whether the bankruptcy discharge is limited to the portion owed before the filing date.

The quick answer? The court looks to the filing date.

Post-petition debts—the new bills you incur after filing your initial bankruptcy paperwork—don't qualify for discharge. You'll remain responsible for paying for them. The only type of debt eligible for discharge is "pre-petition debt," or debt that existed before you filed your matter.

Example. Suppose that you file a Chapter 7 case. Your bankruptcy schedules list your overdue water, sewer, and garbage bills. The Chapter 7 discharge will wipe out any portion of the utility bill account balance that predated your filing. However, you'll be required to pay any charges accrued after your filing date.

The same holds true in a Chapter 13 bankruptcy. All pre-petition debts are included in the Chapter 13 plan (the three- to five-year payment plan you must complete before receiving a discharge). Your post-petition debts, such as a monthly cell phone bill or a new gym membership, remain your responsibility to pay.

Be aware, however, that when you're in a Chapter 13 case, unexpected obligations can come up. Not only is this understood, but the court might be willing to adjust your plan payments to accommodate you. To learn about your options, read Post-Petition Debts in Chapter 13 Bankruptcy.

How Are Dischargeable Debts Treated in Bankruptcy?

In most cases, you can eliminate dischargeable debts in bankruptcy without any repayment. However, whether your creditors will receive anything in your bankruptcy will depend on whether you are filing for Chapter 7 or Chapter 13 bankruptcy.

Dischargeable Debts in Chapter 7 Bankruptcy

Most Chapter 7 bankruptcies are no asset cases—there's nothing for the trustee to sell to pay creditors with. As a result, dischargeable debts are typically wiped out without receiving anything in Chapter 7 bankruptcy.

Further, if there are any proceeds to distribute, general unsecured debts (such as credit card obligations) are the last to get paid and receive a pro-rata share of any money left over after all priority debts (such as alimony, child support, and some taxes) get paid.

However, remember that your discharge only eliminates your liability for these debts. It does not affect liens on your property (such as a mortgage or car lien). As a result, if you stop paying your mortgage or car loan, your lender can still foreclose on or repossess your property even if it cannot sue you personally to collect the debt.

Dischargeable Debts in Chapter 13 Bankruptcy

In Chapter 13 bankruptcy, most dischargeable debts are considered nonpriority general unsecured claims. Depending on your income, assets, and expenses, they typically receive little or nothing through your Chapter 13 repayment plan. And they are discharged upon completion of your plan payments.

However, you have two choices if a dischargeable debt is secured (such as your car loan). If you want to keep the car, you must continue making payments on it during your Chapter 13 bankruptcy (if you meet certain conditions, you might be able to reduce your principal balance through a Chapter 13 cramdown). Alternatively, you can surrender the car and discharge your liability for the car loan.

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