What Does Bankruptcy Not Forgive: Complete Non-Dischargeable Debt Guide

Non-Dischargeable Debt Overview

Student Loans Stand Apart From Other Debts

Student loan debt is the most frustrating non-dischargeable category for most people. Unlike credit cards or medical bills that vanish in bankruptcy, student loans require a separate adversary proceeding where you must prove undue hardship. The standard is deliberately difficult to meet.

Most courts apply the Brunner test, which requires showing three things: you cannot maintain a minimal standard of living while repaying the loans, your financial situation is likely to persist for a significant portion of the repayment period, and you made good faith efforts to repay before seeking discharge. Meeting all three prongs is exceptionally difficult.

Some courts have begun relaxing the Brunner standard slightly, recognizing that it was designed decades ago when student debt levels were far lower. But even in more lenient jurisdictions, most student loan discharge attempts fail. The process requires filing a separate lawsuit within your bankruptcy case, attending hearings, and potentially going to trial.

Partial discharge is sometimes possible. A court might determine that some portion of your student debt creates undue hardship while the remainder does not. This middle ground helps some borrowers even when complete discharge proves impossible. Private student loans and federal student loans receive the same treatment in bankruptcy.

Tax Debts Follow Complex Rules

Tax obligations receive special protection in bankruptcy, but not all taxes are created equal. Some tax debts can be discharged while others survive. The rules depend on tax type, how old the debt is, when returns were filed, and whether the IRS has assessed the tax.

Income taxes may be dischargeable if they meet all of these requirements: the tax return was due at least three years before filing bankruptcy, the return was actually filed at least two years before filing, the tax was assessed at least 240 days before filing, and the return was not fraudulent or an attempt to evade taxes. Miss any one of these requirements and the tax survives.

The three-year rule starts from the return due date including extensions. If you filed an extension for your 2020 taxes, that return was not due until October 2021. The three-year clock starts from October 2021, not April 2021. These timing details matter enormously.

Trust fund taxes, which are taxes you collected from employees and were supposed to remit to the government, are never dischargeable. If you ran a business and withheld payroll taxes but did not pay them to the IRS, that debt survives bankruptcy and the IRS can pursue you personally.

Strategic Timing for Tax Debts

Because tax discharge depends on timing, strategic planning can convert non-dischargeable taxes into dischargeable ones. If your oldest tax debt is two and a half years old, waiting six months to file bankruptcy might make that debt dischargeable. Your attorney should calculate whether timing adjustments could improve your outcome.

Domestic Support Obligations Are Absolute

Child support and alimony represent the most absolute non-dischargeable category. Congress determined that supporting children and former spouses takes priority over giving debtors fresh starts. No exception exists regardless of circumstances.

Past-due child support survives bankruptcy completely. If you owe $30,000 in back support when you file, you still owe $30,000 when your case closes. The automatic stay does not stop support collection from continuing during your case. Support enforcement agencies can garnish wages and intercept tax refunds even while your bankruptcy is pending.

Alimony and spousal support receive the same protection. Property settlement obligations from divorce sometimes receive different treatment, but actual support payments are always non-dischargeable. Chapter 13 requires that you stay current on ongoing support obligations throughout your three to five year plan.

Debts From Wrongful Conduct

Bankruptcy does not reward bad behavior. Debts arising from fraud, willful injury, or other wrongful conduct survive discharge because Congress decided wrongdoers should not escape consequences through bankruptcy.

Fraud-based debts include money obtained through false pretenses, false representations, or actual fraud. If you lied on a credit application about your income or employment, that debt might be challenged as non-dischargeable. If you ran up credit cards knowing you would file bankruptcy, creditors can argue fraud.

The creditor must prove fraud in an adversary proceeding within your bankruptcy case. They do not get automatic protection. But if they file the appropriate motion and prove their case, that specific debt survives while others are discharged.

Willful and malicious injury creates another non-dischargeable category. If you intentionally hurt someone or their property, resulting damages cannot be discharged. The key word is intentional. Negligent injury, like a car accident caused by carelessness, can usually be discharged. Debts from DUI accidents receive special treatment - even though drunk driving is usually negligent rather than intentional, Congress specifically made DUI injury debts non-dischargeable.

Government Fines and Penalties

Most fines, penalties, and forfeitures owed to government entities cannot be discharged in bankruptcy. This includes criminal fines, civil penalties, and restitution orders. Traffic tickets, parking fines, and similar government obligations typically survive.

Criminal restitution is absolutely non-dischargeable. If a court ordered you to pay restitution as part of a criminal sentence, bankruptcy provides no relief. The restitution obligation remains regardless of chapter filed or circumstances. Court costs and fees from criminal proceedings generally survive as well.

Debts Not Listed in Your Bankruptcy

Here is a trap that catches people: debts you fail to list in your bankruptcy schedules may not be discharged. The law requires you to list all creditors so they receive notice of your case and the opportunity to participate. Creditors who receive no notice may have their debts survive.

In no-asset Chapter 7 cases, where creditors receive nothing anyway, unlisted debts are often discharged despite the omission. Courts reason that notice would not have changed anything since no distribution occurred. In asset cases or Chapter 13, unlisted creditors have stronger arguments for non-discharge.

The safest approach is listing every debt completely and accurately. Do not try to hide debts from family members or protect certain creditors. List everyone. Let the law determine what gets discharged. Amending schedules to add forgotten creditors is possible before your case closes.

Frequently Asked Questions

Can I ever discharge student loans in bankruptcy?
Yes, but only by proving undue hardship in a separate court proceeding called an adversary proceeding, which succeeds in a small minority of cases.

What if my ex-spouse was supposed to pay a joint debt?
Divorce agreements do not bind creditors. If the debt is in your name, creditors can pursue you regardless of your divorce decree.

Do medical bills survive bankruptcy?
No. Medical debt is fully dischargeable in both Chapter 7 and Chapter 13 bankruptcy proceedings.

What about credit card debt from fraud?
The creditor must prove fraud in an adversary proceeding. If they do not challenge it within the deadline, the debt gets discharged.

Can I discharge old tax debt in bankruptcy?
Possibly. Taxes meeting specific age and filing requirements may be dischargeable, including taxes from returns due more than three years ago.