Will Bankruptcy Wipe Out All My Debts: Complete Discharge Guide

Debt Discharge Overview

Debts That Get Wiped Out Completely

The good news is that most consumer debts disappear entirely in bankruptcy. Credit card balances, regardless of amount, are fully dischargeable. Whether you owe $5,000 or $50,000 on cards, bankruptcy eliminates that debt completely.

Medical bills receive the same treatment. Hospital charges, doctor bills, lab fees, and prescription costs all get wiped out. Given that medical debt is the leading cause of bankruptcy filings, this represents significant relief for millions of people.

Personal loans from banks, credit unions, and online lenders are dischargeable. Signature loans, debt consolidation loans, and similar unsecured borrowing disappears. Payday loans and title loans can be discharged, though title loans are secured by your vehicle.

Old utility bills get wiped out. Past-due electric, gas, water, phone, and cable bills are dischargeable. Lease obligations disappear if you break a lease before or during bankruptcy. The landlord cannot pursue you for remaining rent on a lease you abandoned.

Secured Debts Work Differently

Secured debts, where property serves as collateral, receive different treatment than purely unsecured obligations. Mortgages, car loans, and similar debts are tied to specific property. Your options depend on whether you want to keep or surrender that property.

If you surrender the property, any remaining deficiency after the lender sells it is typically dischargeable. Surrendered your car and the lender sold it for less than you owed? The deficiency balance disappears. Same with foreclosed homes in most cases.

If you keep the property, you must continue paying the secured debt. Bankruptcy does not eliminate mortgages or car loans if you want to retain the home or vehicle. Chapter 13 provides more options for secured debts - you can cure mortgage arrears over your plan period while keeping the home.

Reaffirmation Decisions

For secured debts you want to keep, you may sign a reaffirmation agreement making you personally liable again despite the bankruptcy. Think carefully before reaffirming. You are giving up bankruptcy protection for that specific debt.

Priority Debts Cannot Be Avoided

Certain debts receive priority treatment in bankruptcy, meaning they must be paid in full regardless of chapter filed. These priority debts reflect Congressional judgment about which obligations deserve special protection.

Child support arrears must be paid completely. You cannot discharge past-due support through Chapter 7 or Chapter 13. Support enforcement continues during bankruptcy, and Chapter 13 plans must provide for support arrears in full.

Alimony and spousal maintenance receive the same protection. Domestic support obligations are absolutely non-dischargeable. You remain responsible regardless of financial circumstances.

Recent income taxes typically cannot be discharged. The rules are complex, but taxes from returns due within the last three years generally survive bankruptcy. Older taxes meeting specific requirements may be dischargeable.

Debts From Wrongdoing Survive

Bankruptcy does not help people escape consequences of their bad acts. Debts arising from fraud, willful injury, or other wrongdoing generally cannot be discharged.

Fraud-based debts survive if the creditor proves fraud in an adversary proceeding. Lying on credit applications, writing bad checks, or obtaining money through false pretenses creates non-dischargeable debt. But creditors must affirmatively challenge discharge - if they do not, even fraudulent debt gets wiped out.

Willful and malicious injury cannot be discharged. If you intentionally hurt someone or damaged their property, resulting judgments survive bankruptcy. DUI-related injury debts are specifically non-dischargeable. Congress made this policy choice explicitly.

The Student Loan Exception

Student loans stand apart from other consumer debt. Both federal and private student loans require proving undue hardship for discharge, a standard most people cannot meet. The practical result is that student loans survive most bankruptcy filings.

The undue hardship standard requires showing that you cannot maintain a minimal living standard while repaying, that circumstances preventing repayment will persist, and that you made good faith efforts to repay. Courts interpret this strictly.

Bankruptcy still helps people with student loans by eliminating other debts. With credit cards and medical bills gone, student loan payments may become manageable. Income-driven repayment plans cap federal loan payments at affordable levels regardless of bankruptcy.

If student loans represent most of your debt, carefully evaluate whether bankruptcy makes sense. You may be better served pursuing income-driven repayment, loan forgiveness programs, or disability discharge outside of bankruptcy.

Frequently Asked Questions

Does bankruptcy eliminate medical bills?
Yes. Medical debt is fully dischargeable in bankruptcy, including hospital bills, doctor charges, and prescription costs.

Can I discharge my car loan in bankruptcy?
You can surrender the car and discharge any deficiency balance, or keep the car and continue paying the loan.

What happens to joint debts in bankruptcy?
Your discharge does not affect co-signers. They remain liable even after your bankruptcy is complete.

Will bankruptcy stop wage garnishment?
Yes. The automatic stay stops garnishment immediately upon filing your bankruptcy petition.

Can I choose which debts to include in bankruptcy?
No. You must list all debts. Which ones get discharged depends on legal categories, not your preferences.