What Debts Are Discharged in Chapter 7 Bankruptcy?

The vast majority of debts can be discharged under chapter 7 bankruptcy, including credit card debt, medical debt, and past-due utility bills.

Particularly under chapter 7, debtors who have filed for bankruptcy honestly and in good faith can get the majority of their debt erased.

What Cannot Be Discharged in Chapter 7 Bankruptcy?

Some debts that cannot be discharged in chapter 7 bankruptcy are student loans, spousal alimony, child support, debts owed to the government as fines, and debts incurred from intoxicated driving.

Besides these, any debts that the court deems fraudulent or in bad faith are unlikely to be discharged.

Creditors may object to certain debts being discharged, but the court has the final say.

When Will My Chapter 7 Bankruptcy Be Discharged?

Your chapter 7 bankruptcy will discharge your debts around 60 days after the 341(a) meeting of creditors.

Typically, this means that the court will discharge your debts about four months after you first file.

Barring any bad faith claims on your paperwork, chapter 7 cases tend to move quickly.

What Is a Discharged Bankruptcy Chapter 7?

A discharge in bankruptcy means that you will be off the hook for paying the covered debts.

Not all debts can be discharged under chapter 7, but many of the most common forms of debt can.

Credit card debt and medical bills are dischargeable, for example.

What Debts Are Discharged in Chapter 7 Bankruptcy FAQs

Bankruptcy is a legal proceeding in which a debtor declares their inability to pay back their creditors. 
There are three common types of bankruptcy known as “chapters” in the U.S. bankruptcy code, Ch. 7, Ch. 11, and Ch. 13, each with varying criteria and consequences.
Chapter 7 is known as a liquidation bankruptcy. Most of your property will be sold to pay off your debts, then whatever debt in excess of the value of your liquidated property will be cleared.
Chapter 13 bankruptcy is a reorganization bankruptcy. With Chapter 13, you are able to keep your personal property and reorganize your debts to a payment schedule that enables you to pay back your creditors over time (often 3 to 5 years).

What Is Bankruptcy?

What Is Bankruptcy? The Three Chapters of Bankruptcy

There are three common types of bankruptcy known as “chapters”in the U.S. bankruptcy code, Ch. 7, Ch. 11, and Ch. 13, each with varying criteria and consequences.

Ch. 7 Bankruptcy

The most common type of bankruptcy is Chapter 7.

Chapter 7 bankruptcy is known as “straight”or “liquidation”bankruptcy.

It is designed to give a “fresh start”by discharging debts that cannot be repaid through the liquidation of the debtor’s assets.

Upon filing Chapter 7, a trustee is appointed to sell the debtor’s non-exempt assets and distribute the proceeds to creditors.

For individuals, the law exempts certain assets such as retirement funds, primary residence, tools for their trade, and personal vehicles from being liquidated to pay back creditors.

This pays back creditors some of what they are owed and protects individuals from having all of their livelihood taken from them.

Ch. 11 Bankruptcy

Chapter 11 bankruptcy is primarily for companies, allowing them a break on paying their debts in order to restructure, come up with new terms for paying their creditors, and become profitable again.

This allows companies to stay afloat while coming up with a new way to pay back creditors.

Chapter 11 is the most complex and expensive form of a bankruptcy proceeding and should therefore be considered after other options have been explored.

Ch. 13 Bankruptcy

Chapter 13 bankruptcy, known as a “Debtor in Possession” Bankruptcy, stands in contrast with Chapter 7 because it allows the individuals to keep from liquidating their property.

Chapter 13 creates a new, more affordable payment plan for the debtor to repay creditors, usually lasting 3 to 5 years.

Once the payment plan is finished, the remaining unsecured debts are discharged.

You Can Avoid It

Bankruptcy is the least thing any business would want to experience. But sometimes because of reluctance, many business owners limit themselves from exploring the many benefits of getting help from financial advisors. Financial advisors can be a great help in steering a business to the path of profitability. Connect with a financial advisor in Beachwood, OH or check out our financial advisor page to see one closest to your area.

Bankruptcy FAQs

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.