Many people are surprised to discover that bankruptcy does not eliminate all their debt problems. There are specific categories of debts that federal law protects from discharge, and knowing them in advance is essential for making an informed decision.
Debts That Always Survive Bankruptcy
The following debts cannot be eliminated in any type of personal bankruptcy: (1) Child support and alimony, these domestic support obligations are absolutely protected; (2) Recent taxes, federal and state taxes from the last 3 years generally cannot be discharged; (3) Government fines and criminal penalties; (4) Debts for injuries caused while driving under the influence.
Student Loans: The Most Painful Exception
Student loans are notoriously difficult to discharge in bankruptcy. To do so, you must demonstrate "undue hardship" under the Brunner standard, a very difficult test. However, courts are beginning to interpret this rule more favorably, and several successful cases in 2022-2024 established new precedents.
Debts That May Be Discharged with Exceptions
Some debts that would normally be dischargeable can survive if the creditor objects in time: debts obtained through fraud, debts for theft or embezzlement, and damages for willful misconduct. The creditor has 60 days from the date of the creditors' meeting to object.
What This Means for Your Decision
If your primary debts are in the non-dischargeable categories, bankruptcy may not be the right tool for you. An attorney can analyze exactly which of your debts would be eliminated and which would survive, so you make a fully informed decision.