When you file for Chapter 7 or Chapter 13 bankruptcy, most debts are eligible for discharge. However, some debts are non-dischargeable.
This means they cannot be eliminated through bankruptcy, no matter your financial situation.
As a Livonia bankruptcy attorney, I often hear clients ask, “Why not?” Let’s break down why some debts stick—and which ones do.
Bankruptcy Law: Federal Rules Override Michigan Law
Bankruptcy is governed by federal law, not Michigan law. This matters because bankruptcy law overrides any state law or contract terms that conflict with it.
Most debts arise from state law contracts—mortgages, car loans, credit cards, leases, and more. However, once you file for bankruptcy, federal law takes charge.
Only the U.S. Bankruptcy Code determines which debts are dischargeable. Michigan law or a loan agreement can’t override that.
What Is a Bankruptcy Discharge?
A bankruptcy discharge is the goal of your Chapter 7 or Chapter 13 case. It’s a court order that permanently stops creditors from collecting on debts included in your bankruptcy.
Once a debt is discharged, you are no longer legally obligated to pay it.
Why Are Some Debts Non-Dischargeable?
The Bankruptcy Code lists non-dischargeable debts in Section 523. These debts are excluded from discharge for reasons tied to public policy or misconduct.
In short, Congress believed these debts should survive bankruptcy because:
- They involve fraud, abuse, or criminal behavior.
- They reflect obligations society considers too important to eliminate.
Student loans, in contrary example, became non-dischargeable only due to lobbying by lenders—not due to debtor misconduct OR because they reflect any important societal value.
Common Types of Non-Dischargeable Debts
The following debts are typically not dischargeable in Michigan bankruptcy:
- Recent tax debts (usually within the past 3 years)
- Debts from fraud or false representation
- Charges over $500 made within 90 days before filing (presumed fraudulent)
- Debts not listed in your bankruptcy case
- Child support or spousal support obligations
- Debts for willful and malicious injury to another
- Court fines and criminal penalties
- Student loans (except in rare cases of undue hardship)
- DUI-related injury claims
- Embezzlement, theft, or fiduciary misappropriation
- HOA or condo dues in specific cases
- Restitution owed due to criminal convictions
This is not a complete list. You should consult a Livonia bankruptcy attorney to assess whether any debt might qualify for discharge despite these rules.
Can Bankruptcy Still Help with Non-Dischargeable Debts?
Yes, bankruptcy can still help—even when you have non-dischargeable debts.
In Chapter 7, non-dischargeable debts remain after your case ends. The court discharges eligible debts, and creditors can resume collecting the rest once your case closes—usually within 4 months.
However, Chapter 13 may offer more help.
Managing Non-Dischargeable Debts in Chapter 13 Bankruptcy
Chapter 13 is a reorganization plan. You repay debts over 3 to 5 years under court supervision.
During that time, creditors can’t collect from you directly. This includes creditors with non-dischargeable debts.
Your Chapter 13 plan sets a monthly payment amount. The court-appointed Trustee uses that money to pay creditors in a priority order.
By the end of the plan:
- Dischargeable debts are wiped out entirely.
- Non-dischargeable debts may be fully or partially paid, depending on your payment plan.
- Any unpaid balance of non-dischargeable debts can still be collected after your case ends.
This delay alone may provide crucial breathing room and financial stability.
Talk to a Livonia Bankruptcy Attorney Today
Don’t assume that bankruptcy can’t help because you owe non-dischargeable debts.
As an experienced Livonia bankruptcy attorney, I have helped hundreds of clients manage both dischargeable and non-dischargeable debt. Bankruptcy can be a powerful tool, even if you can’t wipe everything out.
Let’s talk through your situation and figure out what works for you. Click the button below to schedule your free bankruptcy consultation.