Types of Debt that can be Discharged in Bankruptcy
Almost all unsecured debt can be discharged in bankruptcy.
Secured debt (debt in which some collateral has been posted) is not discharged in bankruptcy, unless the collateral is surrendered. If the collateral is surrendered, the deficiency balance (the amount that is owed after the creditor sells the collateral) would become unsecured and discharged in your bankruptcy. A discharge of a deficiency balance only occurs if you have not signed a reaffirmation agreement (an agreement to repay the debt).
The following debts cannot be discharged in bankruptcy:
- Debts that were incurred by fraud
- Any debt that resulting from operating a motor vehicle, boat or aircraft under the influence (alcohol or drugs)
- Most taxes cannot be discharged, but some personal income tax may be dischargeable in bankruptcy.
- Property settlement agreements as a result of a divorce or legal separation.
- Student loans are not dischargeable in bankruptcy, except in cases where it would create an extreme hardship on the debtor to pay back the student loan.
- Child and spousal support obligations
- Any debt that is a fine or penalty payable to a government unit
- Any payment of an order of restitution
- Home owner association dues