What debts will not be erased through a Chapter 7 bankruptcy?
Debts that will survive and are not eliminated in a Chapter 7 bankruptcy are debts labeled as “priority” debts under the Bankruptcy Code. Priority debts include:
- Domestic support obligations (child support and alimony).
- Extensions of credit to debtor after the filing of the case.
- Wages, salaries and commissions a debtor owes to any employees or independent sales reps, up to a maximum per person earned within the 180 days before the filing of the case or the cessation of business.
- Money owed by debtor to employee benefit plans for services rendered within the 180 days before the filing of the case or the cessation of business.
- Claims against the debtor by certain farmers and fishermen up to a certain amount per farmer or fishermen.
- Claims of individuals for deposits, up to a certain amount, for the purchase, lease, or rental of property, or services for personal, family or household use, that were not delivered or provided.
- Taxes, custom duties, and penalties owed to federal, state and local governmental units.
- Commitments to maintain the capital of an insured depository institution.
- Claims for death or personal injury resulting from the operation of a motor vehicle or vessel while the debtor was intoxicated from alcohol, a drug, or another substance.
Additionally, in most cases, private and federal student loans will not be discharged in a Chapter 7 bankruptcy case. Student loan debt must be addressed through the filing of an adversarial proceeding and after a separate hearing, the facts of the case are evaluated by the Bankruptcy Judge under a test provided by the case law.