What Expenses Does Chapter 7 Bankruptcy Typically Discharge?

If you are overwhelmed by bills and considering bankruptcy, one of the most important questions to ask is:

“What debts will Chapter 7 actually get rid of?”

Chapter 7 bankruptcy is designed to eliminate many common consumer debts and give individuals a true fresh start. But not every expense or obligation is treated the same under bankruptcy law. Some debts are usually discharged, others are usually not, and some fall into gray areas that depend on timing and specific facts.

This guide explains the expenses Chapter 7 bankruptcy typically discharges, what usually survives, and how this works for individuals and families in New York.

What Does “Discharge” Mean In Chapter 7?

When a debt is discharged, it means:

• You are no longer legally obligated to pay it

• The creditor cannot sue you, garnish wages, or take other collection action

• The debt is permanently eliminated, subject to limited exceptions

A Chapter 7 discharge is the court order that provides this relief. Once entered, it is one of the most powerful protections bankruptcy law offers.

Expenses Chapter 7 Bankruptcy Typically Discharges

Chapter 7 is most effective at eliminating unsecured debts, meaning debts that are not tied to collateral like a house or car.

1. Credit Card Debt

Credit card balances are one of the most common debts discharged in Chapter 7, including:

• Major credit cards

• Store cards

• Gas cards

• Balance transfer cards

As long as the debt was not incurred through fraud or very recent luxury purchases, most credit card debt is fully dischargeable.

2. Medical Bills

Medical debt is another category that Chapter 7 handles very well.

Dischargeable medical expenses often include:

• Hospital bills

• Doctor and specialist charges

• Ambulance services

• Diagnostic testing

• Medical collections

Even large medical bills can usually be wiped out, which is a major reason many people turn to Chapter 7 after illness or injury.

3. Personal Loans And Payday Loans

Unsecured personal loans are typically dischargeable, including:

• Bank personal loans

• Online installment loans

• Payday loans and cash advances

These debts often carry high interest rates, and Chapter 7 can eliminate the remaining balance entirely.

4. Utility Bills And Household Expenses

Past-due balances on essential services are often dischargeable, such as:

• Electric bills

• Gas bills

• Water and sewer charges

• Cable and internet balances

The utility debts will not be dischargeable if you continue to use the utility provider. If you do then you may be required to submit a deposit to restore or continue service after filing.

5. Collection Accounts And Charged-Off Debts

Debts that have already been sent to collections or charged off are usually dischargeable, including:

• Old credit card accounts

• Medical collections

• Collection agency accounts purchased from original creditors

Chapter 7 stops collection activity and eliminates the legal obligation to pay these debts.

6. Lawsuit Judgments For Consumer Debt

If a creditor already sued you and obtained a judgment for a typical consumer debt, Chapter 7 can often discharge:

• Credit card judgments

• Medical debt judgments

• Personal loan judgments

This can also stop wage garnishments related to those judgments, with limited exceptions.

7. Certain Older Tax Debts (In Limited Situations)

Some income tax debts may be discharged in Chapter 7 if very specific criteria are met, including:

• The tax return was due at least three years before filing

• The return was actually filed at least two years before filing

• The tax was assessed at least 240 days before filing

• There was no fraud or willful evasion

Tax dischargeability is complex, and many taxes do not qualify, but it is worth reviewing with an attorney.

Expenses Chapter 7 Bankruptcy Usually Does NOT Discharge

Just as important as knowing what Chapter 7 wipes out is understanding what typically remains.

1. Child Support And Alimony

Domestic support obligations are not dischargeable, including:

• Child support

• Spousal support or alimony

• Arrears owed to a former spouse or child

These obligations continue after bankruptcy and must be paid.

2. Most Student Loans

Student loans are generally not discharged in Chapter 7 unless you prove undue hardship in a separate court proceeding, which is difficult and fact-specific.

This includes:

• Federal student loans

• Most private student loans

3. Recent Taxes And Certain Government Debts

Many tax-related debts are not dischargeable, including:

• Recent income tax debts

• Payroll taxes

• Trust fund taxes

• Some penalties and interest

Again, timing and details matter.

4. Debts Arising From Fraud Or Willful Misconduct

Chapter 7 does not discharge debts arising from:

• Fraud or false representations

• Embezzlement or theft

• Willful and malicious injury to a person or property

These debts may survive if a creditor successfully challenges dischargeability.

5. Criminal Fines And Restitution

Court-ordered obligations related to criminal cases are not dischargeable, including:

• Criminal fines

• Restitution orders

6. Secured Debts If You Want To Keep The Property

While Chapter 7 can discharge your personal liability on secured debts, such as:

• Mortgages

• Car loans

You must usually continue paying if you want to keep the property. If you stop paying, the lender may still repossess or foreclose, even though you are no longer personally liable for any remaining balance.

Expenses That Fall Into Gray Areas

Some debts require closer review before filing:

• HOA or condominium fees

• Business-related debts

• Tax penalties

• Court fees and sanctions

• Debts tied to pending lawsuits

Whether these are discharged can depend on when they arose, how they are classified, and whether a creditor objects.

How Chapter 7 Helps Even When Some Debts Remain

Even if not every expense is dischargeable, Chapter 7 can still be extremely helpful.

By eliminating unsecured debts like:

• Credit cards

• Medical bills

• Personal loans

You may free up income to handle obligations that cannot be discharged, such as:

• Child support

• Student loans

• Ongoing housing costs

For many people, this rebalancing makes previously unmanageable finances workable again.

Why Accuracy Matters When Listing Expenses And Debts

When filing Chapter 7, you must:

• Disclose all debts, even those you believe are not dischargeable

• List all creditors correctly

• Be honest and complete in your paperwork

Failing to list a debt or mischaracterizing it can cause serious problems, including delays or denial of discharge.

A bankruptcy attorney helps ensure:

• All dischargeable debts are properly included

• Non-dischargeable debts are identified upfront

• You understand what relief Chapter 7 will and will not provide

FAQs

Does Chapter 7 discharge credit card debt?

Yes. Most credit card debt is fully dischargeable, unless it involves fraud or very recent luxury charges.

Are medical bills discharged in Chapter 7?

In most cases, yes. Medical debt is one of the most commonly discharged types of debt.

Can Chapter 7 wipe out old utility bills?

Yes. Past-due utility balances are typically dischargeable, though service providers may require deposits if you continue to use their service.

Are lawsuits and judgments discharged?

Judgments related to typical consumer debt are often dischargeable. Judgments tied to fraud or intentional harm may not be.

Will Chapter 7 eliminate all my debts?

No. Certain debts, such as child support, most student loans, and recent taxes, usually survive Chapter 7.

Talk To A Long Island Bankruptcy Attorney About Your Debts

Understanding what expenses Chapter 7 bankruptcy typically discharges is critical before you file. Many people assume either that everything will be wiped out, or that bankruptcy will not help them at all. The truth is usually somewhere in between.

If you live in Nassau County, Suffolk County, or the greater New York area and want to understand:

• Which of your debts can be discharged

• Which obligations will remain

• Whether Chapter 7 or Chapter 13 makes more sense for your situation

Kamini Fox, PLLC can help you review your full financial picture and make an informed decision.

Call 516-493-9920 or contact us through the Kamini Fox, PLLC website to schedule a confidential consultation and get clear answers about what Chapter 7 bankruptcy can discharge for you.

This article is for informational purposes only and does not constitute legal advice. To receive advice specific to your circumstances, consult directly with an attorney licensed in your jurisdiction.