Does Declaring Bankruptcy Clear All Debts?

Written By: Attorney Robert Stiberman | Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy Updated April 18, 2023

When you file for bankruptcy, you’re doing so to relieve the burden of your existing debts that you are unable to keep up with. However, your outcome from bankruptcy may not be the clean slate you hope for as not all debts can be discharged. To help you understand what your financial obligations may be, we’re exploring whether you get out of all debts if you declare bankruptcy and what bills you will still owe when all is said and done. 

Understanding Dischargeable and Non-Dischargeable Debts During Chapter 7 Bankruptcy

If you pass a means test that looks at your income, family size, and disposable income after necessities and determines you are unable to pay much of your debt, you may be eligible for Chapter 7 bankruptcy. During this process, your debts are liquidated. A trustee goes through your assets, in rare cases selling off valuable assets, such as a second car or a boat, in order to settle debts, and when that step is completed, many of the debts left over are discharged from your credit history. 

Dischargeable Debts Under Chapter 7

• Medical bills
• Credit cards
• Old utility payments
• Personal loans

Your car and house may also be discharged under Chapter 7 if you do not keep up with payments. However, it’s important to understand that while you will be absolved of making payments, your car may be repossessed and the bank can still foreclose on the house with bankruptcy court permission or after the bankruptcy is finalized, so it is important to maintain good standing with those accounts to avoid losing them.

Non-Dischargeable Debts Under Chapter 7

When filing for Chapter 7, the following debts cannot be discharged: 

• Federal student loans absent extremely limited exceptions
• Tax liens absent some exceptions
• Most federal, state, and local taxes
• Alimony payments
• Child support payments

Discharging Debts Under Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a method of reorganization. During this process, your finances are analyzed to see if you are financially capable of paying off a portion of debt. If so, a structured payment plan is arranged, allowing you to pay a set monthly fee for three to five years to a trustee. The trustee then conveys the payment to creditors, and at the end of the time period, many of the debts are then cleared from their financial record. The same guidelines regarding what is cleared and what is not is the same as chapter 7 bankruptcy. 

However, during your reorganization, you can include your mortgage, car payment, and student loans in your debt repayment plan. After the time has elapsed, your medical debts, credit cards, and other unsecured debt will be discharged, and your student loans, car, and mortgage will resume standard payments. 

Schedule a Free Consultation with a Florida Bankruptcy Attorney Today

If you are struggling under the weight of debt, you don’t have to go through this alone. At Stiberman Law, our bankruptcy attorneys are dedicated to helping people determine if bankruptcy is the right choice for them as well as find financial freedom through bankruptcy and move forward with confidence. To schedule a free consultation, reach out to our office today at (954) 922-2283 or fill out the form below to get started. 

Written By:

Attorney Robert Stiberman

Robert is an experienced bankruptcy attorney adept at handling Chapter 7, 13, and 11 filings, with more than 15 years of experience in bankruptcy cases. Robert represents clients in both consumer and business bankruptcy ... Read More