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Not All Debts Can Be Discharged

A bankruptcy discharge eliminates most debts, but not all of them. Section 523(a) of the Bankruptcy Code lists 19 specific categories of debts that are excepted from discharge. These debts survive your bankruptcy and remain your legal obligation even after the discharge order enters.

Understanding which debts are nondischargeable is essential before you file. If most of your debt falls into nondischargeable categories, bankruptcy may not provide the relief you need. If your nondischargeable debts are small relative to your dischargeable debts, bankruptcy can still be transformative -- eliminating the dischargeable debts frees up income to address the rest.

The Section 523(a) Categories

Here is every category of nondischargeable debt under Section 523(a), explained in plain English:

1. Certain Tax Debts -- Section 523(a)(1)

Most tax debts are nondischargeable, but some older tax debts can be discharged if they meet all of the following conditions (often called the "3-year/2-year/240-day rules"):

• The tax return was due more than 3 years before you filed bankruptcy
• The tax return was actually filed more than 2 years before you filed bankruptcy
• The tax was assessed more than 240 days before you filed bankruptcy
• The return was not fraudulent and you did not willfully evade the tax

Tax debts that do not meet all four conditions survive bankruptcy. This includes most recent income taxes, payroll taxes (trust fund taxes are always nondischargeable), and taxes where no return was filed.

2. Debts from Fraud or False Pretenses -- Section 523(a)(2)

Debts obtained through fraud, false pretenses, or materially false financial statements are not dischargeable. This includes two sub-categories:

• Section 523(a)(2)(A): Debts for money, property, or services obtained by false pretenses, false representation, or actual fraud (other than statements about financial condition). The creditor must prove the debtor made a knowingly false representation that the creditor relied upon.
• Section 523(a)(2)(B): Debts incurred through a materially false written statement about the debtor's financial condition, made with intent to deceive, that the creditor reasonably relied upon. Example: lying on a loan application about your income or assets.
• Section 523(a)(2)(C): Creates a presumption of fraud for consumer debts over $725 to a single creditor for luxury goods or services within 90 days of filing, and cash advances over $1,000 within 70 days of filing.

3. Unlisted Debts -- Section 523(a)(3)

Debts that you failed to list on your bankruptcy schedules are nondischargeable if the creditor did not have notice of the case in time to file a proof of claim or a complaint objecting to dischargeability. This is why accurate and complete schedules are critical. If you forget to list a creditor, that debt may survive.

4. Fiduciary Fraud, Embezzlement, and Larceny -- Section 523(a)(4)

Debts for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny are not dischargeable. This applies to trustees, corporate officers, attorneys, and others who misuse funds held in trust.

5. Domestic Support Obligations -- Section 523(a)(5)

Child support and alimony are never dischargeable in any chapter. This includes court-ordered support, separation agreement obligations, and support debts assigned to a government agency. Domestic support obligations are also priority debts under Section 507(a)(1), meaning they must be paid in full in any Chapter 13 plan.

6. Willful and Malicious Injury -- Section 523(a)(6)

Debts for willful and malicious injury to another person or their property are not dischargeable in Chapter 7. Note the "and" -- the injury must be both willful (intentional) and malicious (wrongful and without just cause). Negligence is not enough.

In Chapter 13, the super discharge narrows this exception: debts for willful and malicious injury to property can be discharged, but debts for willful and malicious injury to persons remain nondischargeable.

7. Government Fines and Penalties -- Section 523(a)(7)

Fines, penalties, or forfeitures payable to a governmental unit are not dischargeable, unless the fine is compensation for actual pecuniary loss. This includes criminal fines, traffic tickets, regulatory penalties, and tax penalties.

8. Student Loans -- Section 523(a)(8)

Student loan debt is not dischargeable unless you demonstrate "undue hardship" in a separate adversary proceeding within the bankruptcy case. Most courts use the three-part Brunner test: (1) you cannot maintain a minimal standard of living if forced to repay, (2) your hardship is likely to persist for a significant period, and (3) you have made good-faith efforts to repay.

This exception applies to both federal and private student loans, and to educational benefit overpayments and scholarship obligations. The undue hardship standard is notoriously difficult to meet, though some courts have begun interpreting it more leniently in recent years.

9. DUI Debts -- Section 523(a)(9)

Debts arising from death or personal injury caused by the debtor's operation of a motor vehicle, vessel, or aircraft while intoxicated are not dischargeable. This covers civil judgments from DUI accidents, not criminal fines (which are separately covered by Section 523(a)(7)).

10. Prior Case Debts -- Section 523(a)(10)

Debts that were or could have been listed in a prior bankruptcy case in which the debtor waived discharge, or in which discharge was denied under Section 727(a)(2) through (7), remain nondischargeable in the new case.

11. Securities Fraud -- Section 523(a)(11)

Debts arising from fraud or manipulation in connection with the purchase or sale of securities, or from a violation of securities laws, are not dischargeable.

12. Bank Fraud and Financial Institution Fraud -- Section 523(a)(12)

Debts for malicious or reckless failure to fulfill a commitment by the debtor to a Federal depository institution, or arising from fraud, embezzlement, or theft at a financial institution.

13. Criminal Restitution -- Section 523(a)(13)

Restitution obligations under federal criminal law (Title 18) are not dischargeable.

14. Debts Incurred to Pay Nondischargeable Taxes -- Section 523(a)(14)

If you borrowed money (including credit card cash advances) to pay nondischargeable tax debts, the borrowed amount is also nondischargeable.

15. Property Settlements in Divorce -- Section 523(a)(15)

Debts to a spouse, former spouse, or child arising from a separation agreement, divorce decree, or property settlement are not dischargeable in Chapter 7. However, they can be discharged in Chapter 13 -- this is one of the key super discharge advantages.

16. HOA and Condo Fees -- Section 523(a)(16)

Post-petition fees owed to a homeowners association or condominium association for property where the debtor retains an interest are not dischargeable in Chapter 7, even if the debtor does not live there. Again, the Chapter 13 super discharge may cover these.

17. Court Fees -- Section 523(a)(17)

Fees imposed by a court for the filing of a case, motion, complaint, or appeal, or for other costs and expenses in connection with an imprisoned debtor's court actions.

18. Federal Tax Penalties on Tax-Advantaged Accounts -- Section 523(a)(18)

Debts for federal tax owed on certain tax-advantaged retirement plans under Section 72(t) of the Internal Revenue Code.

19. Loans from Retirement Plans -- Section 523(a)(19)

Debts arising from violations of federal or state securities laws, including judgments, consent orders, and settlement agreements related to securities violations.

How Nondischargeability Is Determined

Some exceptions are automatic -- the debt is nondischargeable by operation of law without any action by the creditor. These include domestic support obligations, most tax debts, student loans, and DUI debts.

Other exceptions require the creditor to file a complaint (called an "adversary proceeding") within 60 days after the first date set for the 341 meeting. If the creditor misses this deadline, the debt is discharged regardless. The exceptions that require a complaint include:

• Section 523(a)(2) -- fraud and false financial statements
• Section 523(a)(4) -- fiduciary fraud, embezzlement, larceny
• Section 523(a)(6) -- willful and malicious injury

Chapter 7 vs. Chapter 13 Nondischargeable Debts

The Chapter 13 "super discharge" covers some debts that survive Chapter 7. If your nondischargeable debts include property damage from willful acts, divorce property settlements, or post-petition HOA fees, Chapter 13 may provide broader relief. However, after BAPCPA (2005), the gap between the two chapters narrowed significantly. Student loans, tax debts, child support, and fraud debts remain nondischargeable in both chapters.

Practical Guidance

1. Inventory your debts. Before filing, categorize every debt as dischargeable or potentially nondischargeable.
2. Be honest on your petition. List every debt, even ones you think are nondischargeable. Failing to list a debt creates a separate nondischargeability problem under Section 523(a)(3).
3. Do not run up debt before filing. Luxury purchases over $725 within 90 days or cash advances over $1,000 within 70 days are presumed fraudulent under Section 523(a)(2)(C).
4. Consider the super discharge. If you have debts that survive Chapter 7 but not Chapter 13, a 3-to-5-year plan may be worth it.
5. Consult an attorney. Nondischargeability analysis requires examining each debt individually against the statutory exceptions. This is not a do-it-yourself determination.