Discharge Debts

Will my debts be discharged in a Chapter 7 bankruptcy? Generally, yes, that’s the whole idea behind Chapter 7. Non-exempt assets are liquidated and the proceeds are paid to creditors in exchange for the debtor being forgiven from the obligation to pay the debts (that is to say, the debtor is discharged from the liability).  At the end of the case, the judge enters an order to discharge debts.

Here is a list of debts that are discharged in bankruptcy (assuming no fraud in the inducement by the debtor or abuse of the bankruptcy process):

  • Credit cards,
  • Medical bills,
  • Lawsuit judgments,
  • Debts from car accidents;
  • Debts from leases and other contracts,
  • Personal loans and promissory notes.
  • Business debts,
  • Personal guarantees.

But some debts are not dischargeable. Non-dischargeable debts include the following:

  • Domestic support obligations,
  • Governmental fines, penalties, and restitution orders,
  • Court fees,
  • Intoxicated driving fines,
  • Condominium and homeowner association fees (unless in foreclosure situations),
  • Unpaid loans from retirement plans,
  • Debs not discharged in a prior bankruptcy on account of fraud or other bad acts,
  • Student loans (generally),
  • Some taxes cannot be discharged.

What makes Chapter 7 really attractive is that the vast majority of debtors have no non-exempt assets, which means they lose no property even though their debts are discharged. The discharge of debts is the main attraction for Chapter 7 bankruptcy.