What Debts Cannot Be Discharged in Bankruptcy in Illinois?
Filing for bankruptcy offers a fresh financial start, but does that mean every debt disappears? Not quite. While Chapter 7 and Chapter 13 bankruptcy wipe out many forms of debt, federal law carves out several categories that survive the process no matter which chapter a debtor chooses. Anyone considering bankruptcy in Illinois should understand which obligations are likely to remain after the case closes.
Why Doesn’t Bankruptcy Erase Everything?
Bankruptcy is designed to balance two competing interests: giving debtors relief and protecting certain public and private interests that Congress decided shouldn’t be wiped away so easily. That’s why 11 U.S.C. § 523 lists specific categories of debt that are excepted from discharge. These exceptions apply in both Chapter 7 and Chapter 13 cases, though the scope can differ slightly between the two.
Which Debts Typically Survive?
So what falls into this nondischargeable category? A few examples come up again and again in Illinois bankruptcy filings.
- Most federal, state, and local tax debts, particularly recent ones
- Domestic support obligations, including child support and spousal maintenance
- Certain student loans, unless a debtor can show undue hardship
- Debts arising from fraud, false pretenses, or false representations
- Debts for willful and malicious injury to another person or their property
- Restitution or criminal fines ordered as part of a criminal sentence
- Debts from driving under the influence that caused injury or death
- Debts not properly listed on the bankruptcy petition
Why do these particular categories get special treatment? Tax authorities and government agencies have significant leverage in federal law, and lawmakers have generally taken the position that intentional wrongdoing, criminal conduct, and family support obligations shouldn’t be sidestepped through a bankruptcy filing. Whether a specific debt actually qualifies as nondischargeable often depends heavily on the facts of the case, including how old the debt is and how it was incurred.
Does Every Nondischargeable Debt Work the Same Way?
Not exactly. Some exceptions are automatic, meaning the debt remains regardless of any court action. Others, particularly fraud-based debts, require a creditor to file a separate lawsuit within the bankruptcy case, known as an adversary proceeding, to formally establish that the debt should survive discharge. This distinction can matter quite a bit when debtors are trying to anticipate what their financial picture will look like after a case concludes.
What Should Someone Do Before Filing?
Given how much these categories can affect the overall value of filing, it makes sense to take stock of outstanding obligations before moving forward. Is the bulk of your debt made up of credit cards and medical bills, which are typically dischargeable? Or does it lean heavily toward taxes, support obligations, or something else that might not go away? That distinction can shape whether Chapter 7, Chapter 13, or another strategy altogether makes the most sense.
This post is intended for general informational purposes only and should not be considered legal advice, nor does it establish an attorney-client relationship.
If you’re weighing your options, our Chicago bankruptcy lawyers at Bentz Holguin Law Firm, LLC are here to help you sort through the details of your specific situation. We’ll walk through your debts with you, explain how the discharge rules may apply, and help you figure out the path that fits your circumstances. Reach out to us today to schedule a consultation.
Source:
law.cornell.edu/uscode/text/11/523
