Which bankruptcy wipes ALL your debt?

No bankruptcy filing wipes every debt completely clean. Both Chapter 7 and Chapter 13 leave certain obligations untouched by law, and the list of those protected debts is surprisingly consistent no matter which path you choose.

The Bankruptcy Code specifically carves out debts Congress decided should survive a discharge, including most student loans, recent tax bills, child support, alimony, and court fines. So even the most effective debt wipe, a successful Chapter 7, will not touch those categories. Chapter 13 offers a different kind of relief by restructuring what you owe, but it reaches the same endpoint on non-dischargeable debt: you still owe it after your plan ends.

What most people actually mean when they ask about wiping 'all' debt is whether they can eliminate all their dischargeable debt, like credit cards, medical bills, and personal loans. That answer depends on your income, assets, and which chapter you qualify for, not on finding a magic bankruptcy that erases everything.

Chapter 7 bankruptcy erases most unsecured debts without requiring any repayment plan, which makes it the most powerful clean-slate option for qualifying filers. Credit card balances, medical bills, personal loans, and old utility bills can all be wiped away completely. The key limitation is income, you must pass a means test showing you earn less than your state's median or lack disposable income to repay creditors.

What Chapter 7 will not touch are the non-dischargeable debts that survive any bankruptcy, including most tax debts, student loans, and support obligations like alimony or child support. Secured debts such as your mortgage or car loan are also treated differently because the lender can still repossess the collateral if you stop paying. If your budget is crushed by credit cards and hospital bills you cannot hope to repay, Chapter 7 is typically your fastest path to relief, but expect any assets that are not protected by exemption laws to be sold by the trustee to pay creditors.

Chapter 13 is the debt relief tool for people whose income is too high to pass the Chapter 7 means test. Instead of wiping out debt immediately, it uses a court-supervised repayment plan to protect your assets and income while you catch up.

You keep everything you own and make one monthly payment to a trustee for three to five years. The payment is based on what you can reasonably afford after your living expenses, not what your creditors demand. At the end of the plan, remaining unsecured debts like credit cards and medical bills are typically discharged, even if you paid pennies on the dollar.

This works because it stops the collection clock and a trustee decides what gets paid, not your creditors. If you earn a steady living but are drowning in payments you can no longer manage, Chapter 13 gives you breathing room without losing your home or car in the process.

Some debts are practically impossible to shake because the law specifically protects them from discharge, no matter which bankruptcy chapter you file. While no bankruptcy eliminates every debt, the ones below survive both Chapter 7 and Chapter 13 except in extremely rare circumstances.

• Most student loans - Discharging them requires a separate lawsuit (an "adversary proceeding") and proving "undue hardship," a standard few meet.
• Recent tax debt - Income taxes from the last three years, unfiled returns, or tax liens generally stick.
• Domestic support obligations - Alimony and child support are permanently non-dischargeable; you cannot wipe them.
• Criminal fines and restitution - Court-ordered penalties from criminal cases always survive.
• Debt from fraud or willful injury - If a creditor proves you lied on a credit application or caused malicious harm, that debt stays even after discharge.

If your financial stress comes primarily from these categories, bankruptcy may not deliver full relief. That doesn't mean it's useless, but you should check whether your dischargeable debt is substantial enough to make the process worthwhile.

These three categories are notoriously difficult to discharge, and in most cases, they survive bankruptcy entirely. While other sections cover general unsecured debt, taxes, student loans, and family support obligations live under much stricter rules. You should assume they will remain your responsibility unless you meet very specific legal tests.

Here is how they typically hold up in Chapter 7 and Chapter 13:

• Student loans: These require a separate lawsuit called an 'adversary proceeding' and proof of 'undue hardship,' a standard courts make extremely hard to meet. Most filers do not succeed, leaving the loans intact.
• Income taxes: Older tax debt can sometimes be wiped out, but only if the tax return was originally due at least three years ago, you actually filed it at least two years ago, and the IRS assessed the bill at least 240 days before filing. Recent taxes and unfiled returns almost never qualify.
• Support debts: Domestic support obligations, including child support and alimony, are legally non-dischargeable in both chapters. The automatic stay also does not stop most collection efforts for ongoing support.

Filing bankruptcy does not pause the interest on student loans or stop wage garnishment for past-due child support. Before you assume any tax or student debt will simply disappear, you need a specific ruling from the court, not just the standard discharge order. Because these debts usually stick, many people use Chapter 13 to force a manageable repayment plan for them while wiping out other balances.

Most people keep everything they own in Chapter 7. That's because bankruptcy exemptions protect certain property up to a dollar limit, and most everyday belongings fall well under those caps. The core idea is that you get a *fresh start*, not left with nothing. Common protected assets include household goods, clothing, a modest vehicle, tools you use for work, and some equity in your home. If an asset is fully covered by an exemption, the trustee cannot sell it to pay creditors.

The real risk is non-exempt property: luxury items, a second home, significant cash, or large tax refunds that exceed your state's limits. Exemption amounts vary widely by state, and some let you choose between state and federal lists. Because rules diverge so sharply, the practical step is to review your state's exemption schedule with a local bankruptcy attorney before filing. A brief consultation will tell you whether anything you own is actually exposed.

Bankruptcy beats debt settlement when most of your debt is unsecured and you genuinely cannot afford a realistic settlement plan anyway. The core advantage isn't a smaller discount, it's the legal finality. A Chapter 7 discharge can wipe eligible debt in months, while debt settlement drags on for years with no guarantee every creditor will agree. If you would spend years scraping together lump-sum offers only to still owe some creditors and get a 1099 for forgiven amounts, the certainty of a discharge makes far more sense.

Debt settlement can work if your hardship is temporary and you have enough income to fund lump-sum offers quickly, but it becomes a losing game when the numbers don't line up. Settlement companies typically charge heavy fees while you stop paying creditors and watch your credit drop, interest and late charges keep piling up, and some creditors refuse to negotiate at all, leaving you sued. Bankruptcy stops collection lawsuits cold through the automatic stay and gives a clear endpoint, while a failed settlement attempt often ends in bankruptcy anyway, just with more money gone and a lawsuit judgment in hand.

Your bankruptcy discharge wipes out your personal obligation to pay, but it does not wipe out your cosigner's liability. The lender can still demand full payment from your cosigner and pursue collections, lawsuits, or credit damage against them as if you never filed.

This is a core protection gap in Chapter 7:

• The automatic stay stops collectors from coming after you, but it does not protect anyone who cosigned with you.
• Once your debt is discharged, the lender loses the right to collect from you, but the cosigner's contract remains fully enforceable.
• A cosigner who gets stuck paying can sue you for repayment only if a separate agreement gives them that right, but bankruptcy typically bars that too.

Chapter 13 offers a partial safety net for cosigners, but only on consumer debts. While your repayment plan is active, the court's co-debtor stay temporarily blocks the lender from collecting from your cosigner. That protection ends if your case is dismissed or converted to Chapter 7, and it does not apply to business debts or if the lender proves the cosigner would not be harmed.

Before filing, tell any cosigner what you plan to do. They may need to prepare to take over the payments or negotiate directly with the lender. If protecting a cosigner is a priority, Chapter 13 might be worth a closer look.

Business bankruptcy works differently, and whether it wipes your debt depends entirely on how you set up the company. If you're a sole proprietor, your business debt is your personal debt. A personal Chapter 7 or Chapter 13 filing covers both equally. But if you formed an LLC, S-Corp, or C-Corp, the rules split fast.

Corporations and LLCs cannot get a discharge in Chapter 7. The trustee liquidates the business assets, pays creditors what little they can, and the company dies. A Chapter 13 restructuring isn't available for a corporation either. If you want to wipe corporate debt and keep the business running, Chapter 11 is the primary option, though a small business Subchapter V filing can make it faster and cheaper.

The personal guarantee trap is what trips up most business owners. Even if the company files a separate bankruptcy to wipe its debts, any loan, credit card, or lease you personally signed stays stuck to you. The corporate bankruptcy only wipes the company's obligation, not yours.

What this means in practice: if you personally guaranteed the company's line of credit, you still owe it even after the LLC is dissolved. A personal Chapter 7 filing on your end becomes the only way to discharge that guarantee. This is why most small business bankruptcies end up involving both the company and the individual owner. Check with a bankruptcy attorney before deciding to file only one.