The Promise and the Limit of Bankruptcy Discharge
Bankruptcy’s most powerful tool is the discharge — the court order that eliminates your legal obligation to repay qualifying debts. After discharge, creditors can never again pursue you personally for those debts. But the discharge has limits. Congress has carved out specific categories of debt that survive bankruptcy, and understanding them is essential before you file.
If most of your debt falls into non-dischargeable categories, bankruptcy may provide less relief than you expect. Knowing this upfront helps you plan.
Student Loans — The Hardest to Discharge
Federal and private student loans are not discharged in bankruptcy unless you can prove ‘undue hardship’ — a very high standard that requires showing the loans create a hardship that is likely to persist for a significant portion of the repayment period, and that you’ve made good-faith efforts to repay.
Courts apply the Brunner test (or similar standards) to evaluate hardship. In practice, fewer than 1% of bankruptcy filers successfully discharge student loans, though recent court decisions and updated DOJ guidance have made this slightly more accessible than it once was. An adversary proceeding — a separate lawsuit within the bankruptcy — is required to attempt discharge.
Taxes — It’s More Complicated Than You Think
Not all tax debts survive bankruptcy. Recent income taxes (less than 3 years old), taxes from unfiled returns, and taxes involving fraud are non-dischargeable. However, older income tax debts — generally those where the return was due more than 3 years ago, assessed more than 240 days ago, and no fraud was involved — can potentially be discharged.
The rules are nuanced and have exceptions within exceptions. If you have significant tax debt, a bankruptcy attorney with tax law knowledge is essential.
Domestic Support Obligations — Absolute Bar
Child support and alimony (collectively called domestic support obligations) are completely non-dischargeable in all bankruptcy chapters. These debts survive and remain fully collectable. If you owe back support, bankruptcy will not reduce or eliminate it — though Chapter 13 can help you catch up through a structured repayment plan.
Debts from Fraud, False Pretenses, or Intentional Wrongdoing
Debts incurred through fraud — lying on a loan application, using a credit card with no intent to repay, writing bad checks — can be challenged by the creditor as non-dischargeable. The creditor must file an objection (adversary proceeding) within the bankruptcy to have a specific debt declared non-dischargeable on these grounds.
Criminal fines and restitution orders are also non-dischargeable, as are debts arising from DUI accidents that caused death or injury, and debts related to willful and malicious injury to another person or their property.
What Is Dischargeable — To Provide Perspective
The good news: most common consumer debts are dischargeable. Credit card balances, medical bills, personal loans, payday loans, utility bills, lease obligations (in some circumstances), and even some older tax debts can all be eliminated. For most people in financial distress, the majority of their debt does qualify for discharge.