Not all debts are created equal in bankruptcy. Some are eliminated entirely, some must be repaid, and some survive no matter what. Here is what you need to know.
These common debts are generally dischargeable in both Chapter 7 and Chapter 13 bankruptcy:
Credit card balances are unsecured debts and are fully dischargeable. This includes store credit cards, major credit cards, and charge accounts. One exception: if you made luxury purchases over $800 within 90 days of filing, or cash advances over $1,100 within 70 days, the creditor may challenge discharge of those specific charges under section 523(a)(2)(C).
Medical debt is fully dischargeable. It is one of the most common reasons people file bankruptcy in the Kansas City area. Hospital bills, doctor bills, dental bills, ambulance charges, and medical collection accounts are all eliminated.
Unsecured personal loans, including bank loans, credit union loans, and loans from online lenders, are dischargeable. If the loan is secured by collateral (like a car title loan), the lien on the collateral survives even if the personal obligation is discharged.
Past-due electric, gas, water, phone, and internet bills are dischargeable. Note that utility companies can require a deposit (up to two months' estimated service) after you file bankruptcy, but they cannot cut off service solely because of the filing.
Payday loans are unsecured debts and are dischargeable. Avoid taking out new payday loans shortly before filing, as the lender could argue the debt was incurred fraudulently.
If your car was repossessed or your home was foreclosed, the remaining balance after the sale (the deficiency) is an unsecured debt and is fully dischargeable.
Most money judgments are dischargeable, provided the underlying debt was dischargeable. A judgment for unpaid credit cards is dischargeable. A judgment for fraud, intentional injury, or DUI damages is not. Judgment liens on real property may need to be avoided through a separate motion.
Income tax debts may be dischargeable if they meet the 3-year, 2-year, and 240-day timing rules. See our full tax debt guide for details.
Under 11 U.S.C. section 523(a), these debts survive bankruptcy:
Student loans are generally non-dischargeable under section 523(a)(8) unless you can prove undue hardship through an adversary proceeding (a separate lawsuit within your bankruptcy case).
The Eighth Circuit (which covers Missouri) uses the totality of circumstances test, examining your income, expenses, and whether your situation is likely to persist. Some bankruptcy courts have become more willing to discharge student loans in recent years, particularly after the DOJ updated its guidance in 2022.
Even if full discharge is not possible, some debtors negotiate partial discharge or modified repayment terms through the adversary process.
Taxes that do not meet the 3-year, 2-year, and 240-day rules remain non-dischargeable. Payroll taxes, fraud penalties, and unfiled return taxes are never dischargeable regardless of age. Full tax debt analysis.
Domestic support obligations (DSOs) under section 523(a)(5) are never dischargeable. This includes child support, spousal maintenance (alimony), and any debts assigned to a government unit for collection of DSOs. DSOs are also the highest priority claim in bankruptcy -- they get paid before all other creditors.
Debts for death or personal injury caused by driving while intoxicated are non-dischargeable under section 523(a)(9). This applies in both Missouri and Kansas cases.
Debts obtained through fraud, false pretenses, false representation, or actual fraud are non-dischargeable under section 523(a)(2). The creditor must file an adversary proceeding to establish fraud. This includes debts from materially false financial statements given to obtain credit.
Criminal fines, penalties, and restitution orders are non-dischargeable under section 523(a)(7). This includes traffic tickets, court costs in criminal cases, and restitution ordered as part of a criminal sentence.
Debts from willful and malicious injury to another person or their property are non-dischargeable under section 523(a)(6). The creditor must prove the injury was both willful (intentional) and malicious (wrongful and without just cause).
Backed by collateral. If you stop paying, the creditor can take the property.
In bankruptcy, you can keep secured property by staying current (reaffirmation in Chapter 7) or curing arrears through a Chapter 13 plan. You can also surrender the property and discharge the remaining debt.
No collateral. The creditor cannot take specific property if you do not pay.
Unsecured debts are eliminated in Chapter 7 (if dischargeable) or receive partial payment in Chapter 13. General unsecured creditors are last in line and often receive pennies on the dollar.
Priority debts are a special class defined in 11 U.S.C. section 507. They must be paid ahead of general unsecured creditors and often cannot be discharged:
In Chapter 13, all priority claims must be paid in full through the repayment plan. In Chapter 7, priority claims are paid from liquidation proceeds before general unsecured creditors receive anything.
For more on non-dischargeable debts: 523a.org | nondischargeable.org
Most unsecured debts can be discharged, including credit card balances, medical bills, personal loans, utility arrears, old judgments, payday loans, deficiency balances after repossession or foreclosure, and qualifying old tax debts.
Non-dischargeable debts include most student loans (absent undue hardship), recent tax debts, child support and alimony, debts from DUI/DWI injuries, debts obtained through fraud, criminal fines and restitution, and debts from willful and malicious injury. See 523a.org for the full list.
Student loans are generally non-dischargeable unless you can demonstrate undue hardship through an adversary proceeding. The Eighth Circuit uses the totality of circumstances test. Some courts have become more willing to discharge student loans in recent years, and the DOJ updated its guidance in 2022.
Medical debt is unsecured and fully dischargeable in both Chapter 7 and Chapter 13. In Chapter 7, it is eliminated entirely. In Chapter 13, medical creditors receive whatever percentage your plan pays to unsecured creditors.
Secured debt is backed by collateral (like a mortgage or car loan). Unsecured debt has no collateral (credit cards, medical bills). In bankruptcy, secured creditors can claim the collateral, while unsecured creditors often receive little or nothing.
Priority debts under section 507 must be paid before general unsecured creditors. They include domestic support obligations, certain tax claims, employee wage claims, and administrative expenses. In Chapter 13, priority debts must be paid in full through the plan.
Yes, payday loans are unsecured debts and are fully dischargeable. Avoid taking out new payday loans shortly before filing, as the lender could argue the debt was incurred fraudulently.
If your car is repossessed and sold for less than you owe, the remaining balance (deficiency) is an unsecured debt and is fully dischargeable in bankruptcy.