What Bankruptcy Clears — and the 8 Debts It Never Does

Bankruptcy discharges most unsecured consumer debt: credit cards, medical bills, personal loans, deficiency balances after a repossession, payday loans, old utility bills, most judgments, and business debts you personally guaranteed. It does not discharge child support or alimony, most student loans, recent income taxes, criminal fines and restitution, debts from fraud, injury claims from drunk driving, most retirement plan loans, and any debt you fail to list in the filing.

That is the whole map. The detail below is about the four cases that are more complicated than a yes or no.

Discharged: the ordinary list

One thing about that list that people do not expect: it does not matter how recently the debt was incurred, in general, or how large it is. There is no minimum debt to file and no maximum on what a Chapter 7 can discharge.

Not discharged: the eight, ordered by how often they matter

1. Child support and alimony

Never dischargeable, in any chapter. Domestic support obligations survive completely, and they are given priority — in a Chapter 13 plan, arrears must be paid in full for the plan to be confirmed.

2. Most student loans

Student loans are not discharged unless you show “undue hardship” in a separate proceeding within the bankruptcy. That standard has historically been hard to meet, though the process changed meaningfully in 2022 when the Department of Justice adopted an attestation-based approach that made these cases more tractable than they had been for decades.

The practical takeaway: not impossible, not automatic, and it requires a specific request — not just listing the loan. See student loans and the undue hardship standard.

3. Recent income taxes

This is the most misunderstood item on the list, because the answer is genuinely “sometimes.” Older income tax debt can be discharged if three conditions are all met: the return was due more than three years before filing, it was actually filed more than two years before, and the tax was assessed more than 240 days before. Fraud or willful evasion disqualifies it entirely.

Note what that means: income tax debt has an age at which it becomes dischargeable. Timing the filing can change the outcome by tens of thousands of dollars. Also note what survives regardless: a recorded tax lien survives the discharge, even when the underlying tax liability does not. Payroll taxes and trust fund taxes are never dischargeable. See the three rules that decide whether tax debt is dischargeable.

4. Debts obtained by fraud or false statements

Not automatic. A creditor has to object and prove it within the deadline. The classic scenario: large purchases or cash advances shortly before filing, or a loan application with inflated income. Absent a creditor objection, these are discharged like anything else — but a large recent balance is what draws one.

5. Criminal fines, penalties and restitution

Fines, court costs and restitution ordered in a criminal case are never dischargeable. Many civil penalties payable to a government unit survive too.

6. Personal injury from drunk or drugged driving

Debts for death or personal injury caused by operating a vehicle while intoxicated survive, and this is specific to intoxication — an ordinary negligent-driving judgment is generally dischargeable.

7. Most retirement plan loans

A 401(k) loan is, in substance, borrowing from yourself, and it is not discharged. If you leave the employer it typically becomes a taxable distribution instead.

8. Anything you did not list

Debts omitted from the schedules may not be discharged. This is the most avoidable item on the page and one of the more common problems in self-filed cases — pull all three credit reports before filing rather than listing debts from memory. See filing without an attorney.

Two more that are not exceptions to discharge but behave like them: HOA and condo fees that accrue after filing (pre-filing amounts are dischargeable, ongoing ones are not, as long as you hold the property), and debts from a prior bankruptcy that were denied discharge.

The category that confuses everyone: secured debt

Bankruptcy discharges your personal obligation to pay. It does not remove a lien.

Concretely: a Chapter 7 discharge wipes out your liability on the mortgage, so the lender cannot pursue you for the balance. The lien on the house remains, so the lender can still foreclose if the loan is not paid. The same applies to a car loan.

Which is why “does bankruptcy clear my mortgage” has a two-part answer: yes to the debt, no to the house. If you want to keep secured property, you keep paying for it — or in Chapter 13, you restructure it. See secured debt and keeping the house.

What filing does immediately, regardless of what gets discharged

The automatic stay takes effect the moment the petition is filed, and it stops collection activity across the board — lawsuits, wage garnishment, repossession, foreclosure sales, collection calls. It applies even to debts that will not ultimately be discharged, which is one reason people facing an imminent garnishment file before the discharge question is even settled. See how filing stops a garnishment.

The decision this list should inform

Run your own numbers before anything else: add up the debt that would be discharged, and the debt that would not.

If the dischargeable portion is most of your problem — credit cards, medical bills, personal loans — bankruptcy resolves it, and which chapter applies to you is the next question.

If the non-dischargeable portion is most of your problem — you owe $80,000 in student loans and $6,000 on cards — bankruptcy is the wrong tool and filing would not fix your situation. Income-driven repayment, an IRS installment agreement, or a support modification are the relevant remedies, and each one is handled somewhere other than bankruptcy court. That is a genuinely common situation and it is the reason this article exists ahead of the how-to-file ones.

Frequently asked questions

Does bankruptcy clear all debt? No. It discharges most unsecured consumer debt but never child support or alimony, criminal fines and restitution, most student loans absent an undue hardship finding, recent income taxes, or debts arising from fraud or drunk driving.

Does bankruptcy clear credit card debt? Yes. Credit card balances are the most commonly discharged debt in consumer bankruptcy, including balances already charged off or sold to debt buyers. A creditor can object to a specific charge if it alleges fraud — typically large purchases or cash advances shortly before filing.

Does bankruptcy clear medical debt? Yes, fully and regardless of amount or age. Medical debt is unsecured and has no special protection. Before filing for medical bills alone, check whether the hospital’s financial assistance policy would reduce or eliminate them — nonprofit hospitals are required to have one.

Does bankruptcy clear IRS debt? Sometimes. Income tax debt can be discharged when the return was due more than three years before filing, was filed more than two years before, and was assessed more than 240 days before, with no fraud. Tax liens already recorded survive the discharge even when the tax does not.

Does bankruptcy clear student loans? Rarely automatically, but it is possible through an undue hardship determination requested within the case. The 2022 change in how the Department of Justice handles these requests made them more workable than they had been, and it still requires a specific filing rather than simply listing the loan.

Will bankruptcy stop a wage garnishment? Yes, immediately on filing, through the automatic stay — including garnishments for debts that will not be discharged. Garnishments for child support are treated differently and generally continue.

Does bankruptcy clear an eviction or a judgment? Most money judgments are dischargeable, including judgments for unpaid rent. A judgment for possession — the eviction itself — is not stopped in the same way, and the timing rules here are narrow enough to warrant legal advice before relying on a filing to keep a home.

This article summarizes which debts a consumer bankruptcy discharge covers. It is not legal advice. The exceptions to discharge are statutory and fact-specific, several of them turn on dates and creditor objections, and the statute has been amended repeatedly. Confirm anything that matters with a bankruptcy attorney in your district.