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When individuals file for Chapter 7 bankruptcy, they hope to get a fresh financial start. Filing for Chapter 7 bankruptcy can bring real financial relief, but not all debts go away. Knowing what survives discharge helps you plan realistically and avoid surprises after your case closes.
Key Takeaways
- Child support and alimony
- Most student loans (unless undue hardship is proven)
- Recent income tax debts and taxes tied to fraud or unfiled returns
- Criminal fines and restitution orders
- Debts incurred through fraud or false statements
- Secured debts (mortgages, car loans), if you keep the collateral
- Co-signed debts/your co-signer’s liability remains, and so may yours, depending on the situation
- Business debts you personally guaranteed
Chapter 7 eliminates most unsecured debts (credit cards, medical bills, personal loans), but a defined set of obligations survives. Courts treat certain debts as too important to public policy or too tied to personal conduct for a Chapter 7 discharge. The sections below walk through each category.
Do Business Debts Go Away in Personal Chapter 7?
The answer depends on how your business was structured and whether you personally guaranteed the debt.
If you operate as a sole proprietor, there is no legal separation between you and your business. Personal Chapter 7 can discharge qualifying business debts the same way it would discharge personal debts.
If your business were an LLC or a corporation, it would be a separate legal entity. Personal Chapter 7 does not discharge debts the business entity owes; only a separate business bankruptcy would address those.
The exception is a personal guarantee. When a business owner personally signs for a business loan or line of credit, they become individually liable. A Chapter 7 filing can discharge that personal liability on the guarantee, even if the underlying business debt remains.
An attorney-led discharge review identifies which business-related obligations belong to you personally and which belong to the entity.
Are Student Loans Discharged in Chapter 7?
In most cases, no. Student loans are presumptively non-dischargeable under federal bankruptcy law.
To discharge student loans, you must file a separate adversary proceeding and demonstrate undue hardship. Courts typically apply the Brunner test. This test requires proving that you cannot maintain a minimal standard of living, that the hardship is likely to persist, and that you made good-faith efforts to repay.
Most filers do not meet this standard. Income-driven repayment plans, deferment, or forgiveness programs outside of bankruptcy are often more realistic paths. An attorney can assess whether an adversary proceeding is worth pursuing in your specific situation.
Does Chapter 7 Discharge Child Support or Alimony?
No. Domestic support obligations are completely exempt from discharge.
Child support and alimony are classified as priority debts under the Bankruptcy Code. Courts treat these payments as obligations to dependents and former spouses that no financial proceeding can erase. Arrears, ongoing payments, and interest on unpaid support all survive.
In Texas, wage withholding orders are commonly used to collect domestic support. Falling behind after a bankruptcy discharge can trigger enforcement action, including contempt proceedings.
Can Tax Debt Be Discharged in Chapter 7?
Some tax debts can be discharged, but only under specific conditions.
Taxes are potentially dischargeable if:
- The tax debt is from income taxes (not payroll taxes or fraud penalties)
- The return was due at least three years before the bankruptcy filing
- The return was filed at least two years before filing
- The IRS assessed the tax at least 240 days before filing
- The return was not fraudulent, and no willful tax evasion occurred
Recent taxes, payroll taxes, and any taxes tied to fraud or unfiled returns are not dischargeable. The rules are technical, and small timing errors can disqualify an otherwise eligible debt. A careful analysis before filing protects against leaving dischargeable tax debt on the table.
Are Court Fines and Restitution Discharged in Chapter 7?
No. Debts arising from criminal cases (including government fines, penalties, and court-ordered restitution) survive Chapter 7 discharge.
Restitution payments to victims and fines payable to a government unit are specifically excluded from discharge under the Bankruptcy Code. These obligations represent the court system’s judgment about accountability, and bankruptcy does not override them.
What Happens to Debts Involving Fraud or False Statements?
Debts obtained through fraud are not dischargeable, and creditors can challenge discharge in court.
If a creditor can demonstrate that a debt arose from a materially false statement, intentional misrepresentation, fraud in obtaining credit, or use of another person’s identity, the bankruptcy court can exclude that debt from discharge. This applies even if the rest of your debts are wiped out.
Common situations include false financial statements on loan applications, misrepresented income on credit applications, and intentional property damage. An attorney’s review of your debt history before filing helps identify any exposure here.
What Happens to Secured Debts Like Mortgages and Car Loans?
Chapter 7 discharges your personal liability on secured debts. However, it does not remove the lien the creditor holds on the property.
If you want to keep your home or vehicle, you must continue making payments. In some cases, a reaffirmation agreement is used to formally preserve the loan and keep the property. If you surrender the collateral, the remaining balance is typically discharged.
Walking away from a secured debt eliminates your obligation to pay the difference between the loan balance and the property’s value. Evaluating whether to reaffirm or surrender depends on your financial situation and long-term goals.
What Happens to Co-Signed Debts After Discharge?
Your discharge does not erase the obligation for your co-signer.
When you file Chapter 7 and receive a discharge on a joint debt, your liability ends. Your co-signer remains fully responsible to the creditor. If payments stop, the creditor can and will pursue them directly.
If you are the co-signer on someone else’s debt and they file for Chapter 7, the same applies in reverse: you may become the sole party the creditor pursues. Understanding these dynamics before filing prevents unexpected consequences for people close to you.
What If a Creditor Keeps Collecting or Reporting After Discharge?
Once a discharge is granted, creditors are legally prohibited from continuing collection efforts on discharged debts. If a creditor calls, sends letters, files lawsuits, or reports discharged debts as active on your credit report, they may be in violation of federal law.
Depending on the conduct, the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) may apply. The FDCPA addresses continued collection attempts on debts no longer owed.
The FCRA provides remedies when credit bureaus continue reporting discharged debts inaccurately. Repeated or automated calls may also implicate the Telephone Consumer Protection Act (TCPA), depending on the facts.
Not Ready for Bankruptcy? There May Be Another Path.
Chapter 7 is not the right fit for everyone. Some people are not eligible, others are not ready, and some are managing multiple unsecured debts with escalating collection pressure or lawsuit risk.
Our Debt Protection Program (DPP) is an attorney-led alternative designed for clients carrying $20,000 or more in unsecured debt. Our attorneys negotiate repayment plans, monitor for FDCPA violations, and build a defense-ready posture before litigation happens. If you are not sure bankruptcy is your path, a free debt review can help identify where you stand.
Chapter 7 Discharge FAQs
What debts are not dischargeable in Chapter 7?
Child support, alimony, most student loans, recent income taxes, criminal fines and restitution, fraud-based debts, and secured debts you choose to keep are among the most common non-dischargeable obligations.
Are student loans ever discharged in bankruptcy?
Rarely. An adversary proceeding is required, and the filer must prove undue hardship under a strict legal test. It is possible, but not common.
Can IRS tax debt be discharged in Chapter 7?
Older income tax debts may qualify if specific timing conditions are met. Recent taxes, payroll taxes, and taxes tied to fraud or unfiled returns are not dischargeable.
Can I keep my car or house in Chapter 7?
Yes, in many cases, but you must continue making payments and may need to sign a reaffirmation agreement. Your attorney can help you determine whether it makes more financial sense to keep or surrender the property.
What happens to a co-signer if I file Chapter 7?
Your discharge removes your personal liability, but your co-signer remains fully responsible to the creditor. The creditor may pursue them directly after your discharge.
Do creditors have to stop calling after discharge?
Yes. Post-discharge collection calls on discharged debts may violate the FDCPA. If this is happening, document the contact and request a legal review immediately.
Can a discharged debt still appear on my credit report?
Discharged debts should reflect a zero balance on your credit report. If a creditor continues reporting them as active or in default, this may be an FCRA violation and may be actionable.
What is the difference between a sole proprietor and an LLC in Chapter 7?
A sole proprietor and their business are legally the same person. Personal Chapter 7 can discharge qualifying business debts. An LLC or corporation is separate, and personal Chapter 7 only addresses your individual liability, not the entity’s.
What if I had a personal guarantee on a business loan?
Chapter 7 can discharge your personal liability on a guarantee even if the underlying business debt remains. Attorney review is key to identifying guarantees before filing.
What does “undue hardship” mean for student loans?
Courts apply a three-part test requiring proof that you cannot maintain a minimal standard of living, the condition is likely permanent, and you made good-faith repayment efforts. The bar is high, and an adversary proceeding must be filed separately.
What should I do if a creditor violates the discharge injunction?
Contact an attorney immediately. Continued collection on a discharged debt can result in contempt-of-court proceedings against the creditor and, depending on the creditor’s conduct, FDCPA or FCRA claims.
Is Chapter 7 the right option if I have mostly secured debts?
Not necessarily. Chapter 7 discharges personal liability but does not remove liens. If your primary debts are secured, other strategies may provide better outcomes. A free bankruptcy review can help you evaluate your options.
Need Help With Your Chapter 7 Bankruptcy?
Request a Free Bankruptcy Review with The Debt Defenders.
If you are unsure which debts will remain after a Chapter 7 discharge, Debt Defenders can guide you through the process. Contact us today to discuss your financial options and take the next step toward regaining control of your finances.