What Debts Can and Can’t Be Discharged in Bankruptcy (New York Edition)

Filing for bankruptcy in New York can offer powerful relief—but not all debts go away. Some obligations survive your case and continue after discharge, especially if they’re tied to family court, fraud, or the government.

This guide explains which debts are dischargeable and which are non-dischargeable, with a focus on New York law and Second Circuit case interpretations. Whether you’re considering Chapter 7 or Chapter 13, knowing the rules can help you make informed decisions.

✅ Debts You Can Discharge in Bankruptcy

Bankruptcy can eliminate most unsecured debts, including:

  • Credit card debt

  • Medical bills

  • Personal loans

  • Old utility bills

  • Old lease obligations and repossessions

These debts are generally dischargeable in both Chapter 7 and Chapter 13 unless they were incurred through fraud or misrepresentation.

🚫 Debts You Cannot Discharge in Bankruptcy

1. Domestic Support Obligations

Obligations like child support, alimony, or maintenance are never dischargeable in bankruptcy. Federal law under 11 U.S.C. § 523(a)(5) makes this clear.

New York courts will even treat related debts—like unpaid medical bills for a child—as non-dischargeable if they are considered part of the support arrangement (In re Growney, 15 B.R. 849). Attorney’s fees related to family court matters may also be non-dischargeable (In re Spong, 3 B.R. 619).

2. Debts From Fraud, Embezzlement, or Willful Injury

If a debt stems from fraud, intentional wrongdoing, or malicious injury, it is non-dischargeable under § 523(a)(2), (4), or (6). Common examples include:

  • Fraudulently obtained loans or credit card charges

  • Embezzlement or theft in a fiduciary role (In re Morris Ketchum, Jr. & Associates, 409 F. Supp. 743)

  • Selling counterfeit or infringing goods (Burberry Ltd. v. Horowitz, 2016 Bankr. LEXIS 805)

In these cases, creditors can file an adversary proceeding to block discharge of the debt.

3. Student Loans

Student loans are typically not dischargeable unless the borrower proves undue hardship through a separate adversary proceeding.

Although difficult, it is not impossible. Courts use varying tests to determine undue hardship, and a successful discharge must show that repayment would cause severe, ongoing financial difficulty (Easterling v. Collecto, Inc., 692 F.3d 229).

4. Government Fines, Penalties, and Traffic Violations

Under 11 U.S.C. § 523(a)(7), debts that are penalties owed to a governmental unit—such as:

  • Traffic tickets

  • Toll violations

  • Fines for building code or sanitation violations

  • Criminal fines and restitution

are not dischargeable in Chapter 7. These debts survive the case and remain fully collectible.

However, if you file a Chapter 13, Traffic tickets and Toll Violations can be discharged upon successful completion of your repayment plan, per 11 U.S.C. § 1328(a).

⚖️ Chapter 13 offers broader relief here than Chapter 7, making it a smart option if you’re overwhelmed by NYC parking tickets or toll penalties.

5. Certain Debts Owed to the U.S. Government

Debts tied to federal military service or contracts with the federal government may be excluded from discharge. Examples include:

  • Certain military-related obligations under 50 U.S.C. § 3977

  • Debt from overpayment of military benefits or federal pensions

  • Government procurement or grant fraud

These cases are fact-specific and may require review of the statutes that created the obligation.

🧭 How New York Courts Decide Dischargeability

New York bankruptcy courts, within the Second Circuit, apply the rule of “substance over form.” That means they look at the true nature of the debt, not just how it’s labeled.

For instance:

  • A medical bill ordered as part of child support may be non-dischargeable support, even if not directly paid to the child or spouse.

  • A debt from malicious conduct doesn’t need to involve violence; deceit, betrayal of trust, or breach of fiduciary duty can qualify (Horowitz, 2016).

This flexible approach ensures that courts uphold the intent of bankruptcy law to protect legitimate support obligations and penalize misconduct.

📝 Final Thoughts: Know What You Can and Can’t Wipe Out

Bankruptcy is a lifeline—but it’s not a free pass. If you’re dealing with credit card debt, medical bills, or old leases, you can usually wipe them out. But if your financial burdens include support obligations, fraud-related debts, student loans, or government fines, you’ll need to plan carefully and potentially consider Chapter 13 for broader relief.

📞 Need Help Navigating Bankruptcy in New York?

At the Law Office of William Waldner, we help New Yorkers make informed, strategic choices about bankruptcy every day. Whether you’re in Manhattan or White Plains, we’re here to guide you through the process and protect your future.

Call us now or visit www.midtownbankruptcy.com to schedule a free consultation.

Share