What Debts Can and Cannot Be Discharged in Bankruptcy?

One of the most important questions people ask before filing bankruptcy is simple: Will all of my debts actually go away? While bankruptcy can eliminate many financial obligations, not every debt is treated the same under federal law. Understanding which debts are dischargeable and which are not is essential if you are considering Chapter 7 or Chapter 13 bankruptcy. From our offices in Goshen and White Plains at the Law Office of Taran M. Provost, PLLC, we regularly guide clients in Orange County and Westchester County through this analysis so they can make informed decisions regarding how bankruptcy can provide meaningful relief based on the types of debt they carry.

The Meaning of a Bankruptcy Discharge

A bankruptcy discharge is a court order that eliminates your personal legal obligation to repay certain debts. Once a debt is discharged, creditors can no longer attempt to collect it. However, the discharge does not necessarily remove liens from secured property, and it does not apply to every category of debt.

Both Chapter 7 and Chapter 13 offer discharge protections, but the scope and timing differ. Chapter 7 typically provides a quicker discharge of unsecured debts, while Chapter 13 involves a repayment plan before remaining eligible debts are discharged.

Debts Commonly Discharged in Bankruptcy

Most unsecured consumer debts are dischargeable in bankruptcy. These are debts that are not backed by collateral. Common examples include:

• Credit card balances
• Medical bills
• Personal loans
• Utility arrears
• Certain older tax debts (if specific requirements are met)
• Deficiency balances after repossession or foreclosure

In New York, these types of unsecured debts are frequently the primary reason individuals seek Chapter 7 relief. Once discharged, collection calls, lawsuits, and wage garnishments related to those debts must stop permanently.

Even in Chapter 13, unsecured debts may be partially repaid through the plan and then discharged at completion. In some cases, debtors pay only a small percentage of what they owe before receiving a discharge of the remaining balance.

Secured Debts: Discharge vs. Collateral Rights

Secured debts are treated differently because they are tied to specific property, such as a mortgage or car loan. While your personal obligation to repay a secured loan may be discharged, the creditor’s lien on the property generally survives the bankruptcy.

For example, if you discharge a car loan in Chapter 7 but do not continue making payments, the lender may still repossess the vehicle. Similarly, a mortgage lender may foreclose if payments are not maintained, even if the personal liability on the loan has been discharged.

In Chapter 13, secured debts can often be restructured. Mortgage arrears may be repaid over time, and in certain circumstances, junior liens on a home may be stripped if the property value does not support them. These tools can be particularly helpful for homeowners in Orange or Westchester County facing foreclosure.

Student Loans and Bankruptcy

Student loans are among the most misunderstood debts in bankruptcy. As a general rule, federal and private student loans are not automatically discharged. To eliminate student loan debt, a debtor must file a separate legal action within the bankruptcy case known as an adversary proceeding and prove “undue hardship.”

Courts in New York apply a legal standard that requires demonstrating an inability to maintain a minimal standard of living if forced to repay the loans, that this hardship is likely to persist, and that good faith efforts have been made to repay. While student loan discharge is difficult, it is not impossible, particularly in cases involving long-term disability, low income, or other extraordinary circumstances.

Even when student loans are not discharged, bankruptcy can eliminate other debts, freeing up income to make student loan payments more manageable.

Tax Debts: When Are They Dischargeable?

Tax obligations are another area where exceptions apply. Some income tax debts can be discharged in bankruptcy if they meet strict criteria. In general, the tax return must have been due at least three years before applying for bankruptcy, filed at least two years before the bankruptcy, and assessed at least 240 days before applying. The return must also have been filed honestly and without fraud.

Recent income taxes, payroll taxes, and tax penalties related to fraud are typically not dischargeable. However, Chapter 13 can provide a structured way to repay priority tax debt over time without ongoing collection pressure.

Because tax discharge rules are technical and fact-specific, reviewing transcripts and filing history is critical before filing for bankruptcy.

Debts That Are Generally Not Dischargeable

Certain categories of debt are almost always excluded from discharge under federal bankruptcy law. These include:

• Child support and spousal maintenance (alimony)
• Most criminal fines and restitution
• Debts arising from fraud or intentional misconduct
• Debts resulting from driving while intoxicated that caused injury
• Certain government benefit overpayments

Family support obligations receive priority treatment in both Chapter 7 and Chapter 13. Bankruptcy cannot eliminate past-due child support or alimony, and these obligations must remain current during a Chapter 13 plan.

If a creditor believes a debt was incurred through fraud, they may file an objection to discharge in the bankruptcy court. If successful, that specific debt may survive even though other debts are eliminated.

Differences Between Chapter 7 and Chapter 13 Discharge

While many discharge rules overlap, Chapter 13 offers what is sometimes referred to as a broader discharge in limited situations. Certain debts that might not be dischargeable in Chapter 7 may be treated differently in Chapter 13 after successful completion of the repayment plan.

However, priority debts such as child support and most recent taxes remain nondischargeable in both chapters. The decision between Chapter 7 and Chapter 13 often depends on income level, asset protection concerns, and the specific mix of debts involved.

Evaluating Your Debt Profile Before Filing

The effectiveness of bankruptcy depends heavily on the types of debt you owe. For someone overwhelmed by credit cards and medical bills, Chapter 7 may provide sweeping relief. For someone struggling with mortgage arrears or tax debt, Chapter 13 may offer a more practical solution.

At the Law Office of Taran M. Provost, PLLC, we work with individuals and families throughout Goshen, White Plains, and Orange and Westchester counties to analyze their complete financial picture before filing. By identifying which debts can be discharged and which will remain, we help clients set realistic expectations and develop a strategy tailored to their goals.

If you are considering bankruptcy and want to understand exactly what relief may be available in your situation, contact our office to discuss your needs. The right information can make all the difference in choosing a path toward lasting financial stability.