Your Legal
For Life

What types of debt can a Chapter 7 bankruptcy remove?

On Behalf of | May 27, 2020 | Bankruptcy |

Chapter 7 bankruptcy provides a pathway out of debt for individuals who fall under a certain financial threshold. Although some exceptions exist, a successful Chapter 7 filing will discharge most debts. 

Learn more about the types of debt you can and cannot remove through this type of bankruptcy in Iowa. 

Dischargeable debts 

Most types of nonsecured debt are eligible for Chapter 7 bankruptcy discharge. You can ask the court to discharge: 

  • Credit card bills and other types of consumer debt 
  • Personal loans 
  • Overpayment of federal or state benefits 
  • Back rent 
  • Utility bills 
  • Medical bills 

Nondischargeable debts 

A Chapter 7 bankruptcy will not remove your obligation to pay: 

  • Debts you did not list in your bankruptcy filing 
  • Income tax debts from the past three years 
  • Other tax debts, such as business taxes 
  • Legal penalties and fines 
  • Student loans, unless you can prove undue hardship 
  • Legal settlements for personal injury or wrongful debt 
  • Spousal support and child support 
  • Debt accrued through fraud or false pretenses, such as a purchase you had no intention to repay 
  • Cash advances of more than $1,000 made within 70 days of your bankruptcy filing 
  • Luxury goods worth more than $725 purchased within 90 days of your bankruptcy filing 
  • Tax debts involving fraud 

Secured debt 

Debt secured by an asset such as a home or vehicle is dischargeable if you surrender the property. Otherwise, Iowa law allows you to keep property in Chapter 7 bankruptcy up to a certain amount. However, you must become current on the loans for the assets you want to keep. 

To qualify for a Chapter 7 bankruptcy discharge, you must pass a means test. Your income must be below the median household income for households of the same size in your county after you subtract certain allowable expenses. Individuals who exceed the means test may apply for Chapter 13 bankruptcy, which reorganizes eligible debts to create an affordable repayment plan.