What Debts Cannot Be Wiped Out in Chapter 7 Bankruptcy? A Local Bankruptcy Attorney in Bowie, MD, Explains
Many people believe that Chapter 7 bankruptcy is a reset button for every single bill they owe. It is a common belief that filing will wipe out all debt instantly. While Chapter 7 is a powerful tool for a fresh start, it does not erase everything.
Some debts are erased forever, while others will stay with you even after your case is over. Knowing the difference is the first step toward a stable financial future. A bankruptcy attorney in Bowie, MD, can help you understand these rules so you are not surprised by remaining bills later.
What Is Chapter 7 Bankruptcy in Simple Terms?
Chapter 7 bankruptcy is often called “liquidation” bankruptcy. It is designed to help people who cannot afford to pay their current debts. In this process, a person asks the court for a “discharge.” A discharge is a legal order that says you no longer have to pay back certain debts.
It is important to know the difference between secured and unsecured debt. Secured debt is tied to an item, like a house or a car. Unsecured debt, like a credit card, is not tied to any property. Chapter 7 focuses on wiping out personal liability for these debts. However, while some balances vanish, others are protected by law and must still be paid.
What Debts ARE Wiped Out in Chapter 7?
Most people file for Chapter 7 to get rid of common household and personal bills. These are usually “general unsecured debts.” When your case ends, these balances are typically gone:
- Credit card debt: Both store cards and major bank cards.
- Medical bills: Doctor visits, hospital stays, and lab tests.
- Personal unsecured loans: “Payday” loans or signature loans from a bank.
- Old utility bills: Past-due electric, water, or phone bills from old addresses.
- Some old judgments: Court orders from old civil lawsuits.
For example, imagine you have $20,000 in credit card debt and $15,000 in medical bills. After a successful Chapter 7 filing, these amounts are usually wiped out. You can stop the constant phone calls and focus your income on your current needs.
What Debts Are NOT Wiped Out in Chapter 7?
The answer is a clear no. Courts and lawmakers believe that family support is a top priority. Because of this, child support and alimony are “non-dischargeable.” You cannot use bankruptcy to walk away from your duty to support your children or a former spouse.
If you owe past-due support, those “arrears” will remain on your record. You must continue to make these payments even while your bankruptcy case is active. If you fail to pay, the court can still take action against you, such as garnishing your wages.
Are Student Loans Discharged?
In almost every case, student loans are not wiped out. While it is technically possible to erase them, you must prove “undue hardship.” This is very hard to do. You would have to show that you cannot maintain a basic standard of living and that your situation is unlikely to change.
Because the bar is so high, most borrowers find that their student loans survive bankruptcy. If you are struggling with these, an attorney in Suitland, MD, can help you look at other repayment options.
Are Tax Debts Discharged?
Tax debt is complicated. It is broken into several categories based on how old the debt is and the type of tax:
- Recent income taxes: If the tax was due in the last three years, it is usually not erased.
- Payroll taxes: Taxes owed by business owners for employees are never discharged.
- Fraud penalties: If you lied on your taxes, those penalties stay with you.
- Older income taxes: These can sometimes be erased if they meet very specific “timing” rules.
Because these rules are strict, we suggest talking to an attorney in Oxon Hill, MD to review your tax records before you file.
Are Criminal Fines or Restitution Discharged?
No, you cannot erase fines or penalties owed to the government. This includes traffic tickets, court costs, and criminal restitution. The law does not want people to use bankruptcy to avoid the consequences of breaking the law. These debts will remain your responsibility until they are paid in full.
What About Debts From Fraud?
Honesty is vital when you file for bankruptcy. If a creditor believes you lied to get a loan, they can object to your discharge. For example, if you took out a large cash advance right before filing, the court may exclude that debt. This means you would still owe that specific money even if your other bills go away. Working with lawyers in Upper Marlboro, MD, ensures your filing is accurate and follows all legal rules.
Mixed Debt Situations
What Happens If You Have Both Types of Debt?
Many people have a mix of bills. You might owe $10,000 on credit cards (which can be erased) and $5,000 in back taxes (which might stay). Chapter 7 can still be very helpful here. By wiping out the credit card debt, you free up more monthly income.
This extra money makes it easier to pay off the taxes or child support that did not go away. Even if you cannot erase every penny, getting rid of the bulk of your debt provides a massive relief.
Does Maryland Law Change What Is Discharged?
Federal law actually controls what gets erased in bankruptcy. This means the rules for student loans or taxes are the same across the country. However, Maryland law is very important when it comes to your property.
Maryland has its own “exemption” rules. These rules decide what property you get to keep, like your home equity or your car. Because every situation is different, having local help is key. A bankruptcy attorney in Bowie, MD, understands how local courts work and how to protect your assets under Maryland law.
FAQs
Q: What are three debts that cannot be discharged in Chapter 7?
Ans: Three common debts that cannot be erased are child support, most student loans, and recent income taxes. Government fines, like traffic tickets or criminal restitution, also stay on your record after bankruptcy is over.
Q: Can student loans ever be erased in bankruptcy?
Ans: Yes, but it is very rare. You must prove “undue hardship” in a special court hearing. This requires showing that you cannot maintain a basic standard of living and that your financial struggle will likely last for a long time.
Q: Are medical bills wiped out in Chapter 7?
Ans: Yes, medical bills are considered general unsecured debt. These are almost always wiped out completely in a Chapter 7 case. This provides a fresh start for people who faced a sudden health crisis or high hospital costs.
Q: Do I still owe taxes after bankruptcy?
Ans: You often still owe taxes. Most recent income taxes and all payroll taxes are not erased. However, some income taxes that are more than three years old might be discharged if they meet very specific legal requirements.
Q: Can creditors challenge my discharge?
Ans: Yes, creditors can ask the court to keep a debt on your record if they suspect fraud. This often happens if you bought luxury goods or took out large cash advances shortly before filing for bankruptcy protection.
Need Clear Answers About Chapter 7 in Maryland?
Filing for bankruptcy is a big step toward taking back your life. It is important to remember that not all debts are erased in this process. You need a clear plan to handle the bills that stay behind. At Joy Robinson Law Firm, we help you understand your options from start to finish. We look at your unique situation to see how the law applies to you.
If you need a bankruptcy attorney in Bowie, MD, our team is ready to guide you. Contact Joy Robinson Law Firm today to see if Chapter 7 is the right path for your fresh start.