Bankruptcy offers overwhelmed debtors an opportunity for a fresh start through either the liquidation (Chapter 7) or reorganization (Chapter 13) of debt. In both cases, the bankruptcy court is said to discharge the debts. This means creditors lose the right to take action against the debtor, such as collection or repossession attempts. Not all debts can be discharged, however, and several are very difficult to discharge. The most common types of debt to avoid discharge include tax liens, student loans, alimony, debts obtained through fraud, debts for willful injury or wrongful death, and debts where the borrower was acting in a fiduciary capacity.
Debts Never Discharged in Bankruptcy
The U.S. Bankruptcy Code lists 21 different categories of debts that cannot be discharged. Perhaps the most common debts that cannot be discharged under any circumstances are child support and alimony. If you file for a Chapter 7 bankruptcy, you will also continue to owe any condominium or cooperation association fees, along with any other debts that were not discharged in a prior bankruptcy.
Debts Difficult to Discharge in Bankruptcy
Student loans are notoriously difficult to discharge; it is only possible if you can demonstrate undue hardship that is permanent or expected to last for a majority of the life of the note. However, a 2014 ruling in the Eighth Circuit Court of Appeals used a more lenient threshold in discharging a Webster University student's debt.
You cannot discharge income tax debts without a special exemption, which can only be obtained by petitioning the bankruptcy court and explaining why you deserve relief.
Creditors have some ability to stop certain debts from being discharged and the ability to motion the court to grant them relief from the automatic stay that prevents them from pursuing collection activity.