What Is Nondischargeable Debt?

Nondischargeable debt is a type of debt that cannot be eliminated through a bankruptcy proceeding. Such debts include, but are not limited to, student loans; most federal, state, and local taxes; money borrowed on a credit card to pay those taxes; and child support and alimony.

Nondischargeable Debt Explained

Some additional debts may be nondischargeable, but only if the creditor objects to the discharge. These include debts arising from a martial settlement or divorce decree; debts incurred based on fraudulent acts; debts from willful and malicious acts to another person or another person's property; and debts from embezzlement, larceny, or a breach of fiduciary responsibility.

Ways Nondischargeable Debts Are Determined

Many nondischargeable debts are deemed so because they may stem from acts of malfeasance on the debtor’s part. There may be errors of omission as well that fall in this category. For example, unscheduled debts, which refers to any debt that was not listed in the bankruptcy petition, may be nondischargeable. Exceptions to this are possible, particularly if the creditors had knowledge of the bankruptcy filing and took no action.

Under Chapter 7 of the Bankruptcy Code, other types of nondischargeable debt include payments owed for personal injury caused by the debtor while intoxicated and operating a motor vehicle. Creditors can also dispute charges that the debtor wants to remove through bankruptcy. If the court approves such objections, those debts will become nondischargeable.

This includes credit card purchases owed to a single creditor for luxury goods that exceed certain dollar amounts that were procured within 90 days of the bankruptcy filing. However, if the debtor can prove they intended to repay the creditor or that the purchases were not luxury items, the court may allow the debt to be discharged. Cash advances above a certain dollar amount that were received within 70 days of a bankruptcy filing may also be nondischargeable debt.

There are additional circumstances under Chapter 7 where the court could declare debts as nondischargeable. This includes instances where the debtor destroys records of their finances, transfers property in an effort to hide it from creditors, if the debtor does not fulfill the completion of a course in personal finance management, or if the debtor cannot account for certain missing assets.

There may be instances where a debtor previously filed for bankruptcy and had debts discharged. This could be grounds under their latest bankruptcy for their debts to be declared nondischargeable, dependent on the type of bankruptcy that was filed and the timeframe.