What Debts Can Bankruptcy Discharge, and What It Can’t
Bankruptcy can be a powerful tool for getting out from under overwhelming debt, but it doesn’t erase everything. Knowing which debts can and can’t be discharged is key to understanding whether bankruptcy is right for you.
Debts That Can Typically Be Discharged
Most unsecured debts can be wiped out in bankruptcy. These include:
- Credit card debt
- Medical bills
- Personal loans
- Utility bills
- Certain old tax debts (in limited cases)
- Collection accounts and judgments (excluding fraud or injury claims)
In both Chapter 7 and Chapter 13 bankruptcy, these debts are often fully eliminated or reduced significantly through a repayment plan.
Debts That Are Usually NOT Discharged
Some debts are considered too important or are protected by law, including:
- Student loans (unless you meet strict hardship requirements)
- Child support and alimony
- Recent tax debts
- Fines or restitution from criminal cases
- Debts from fraud or intentional harm
- Certain types of personal injury judgments
These debts generally survive bankruptcy and must still be paid.
What About Car Loans and Mortgages?
- If you want to keep your car or home, you’ll need to stay current on those payments or catch up through a Chapter 13 plan.
- If you’re behind and can’t catch up, bankruptcy may help discharge the remaining balance after surrendering the property.
Understanding the Difference: Chapter 7 vs. Chapter 13
- Chapter 7 discharges eligible debts quickly, but you may lose certain assets if they’re not protected by exemptions.
- Chapter 13 sets up a repayment plan over 3 to 5 years and allows you to keep assets while paying back a portion of what you owe.
Talk to an Attorney First
Not all debts are created equal, and not all bankruptcy cases are the same. If you’re unsure how your specific debts will be treated, the best thing you can do is talk to an experienced attorney.
Attorney Greg Kornegay helps individuals across Wilmington and Southeastern North Carolina understand their options and move forward with clarity. Schedule a free consultation today to get honest answers and experienced guidance.
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Attorney Gregory Kornegay
Greg is a trial attorney in Wilmington with over 30 years of experience. Greg was born and raised in southeastern North Carolina. Before law school he managed a store with employees making a payroll every week. His first job out of law school was as an Assistant District Attorney investigating and trying cases for the State of North Carolina. Through the years he has handled many different types of cases – including death penalty cases.
Being married with children has been a blessing and a challenge, but has served him well in understanding the problems individuals and families face as they live out their lives. Greg believes that each case is different and the needs of each client are unique, but there are certain themes of life that we all share.
