Debts That Cannot Be Discharged in a New York City Bankruptcy

A bankruptcy discharge releases you from personal liability on most unsecured debts. Credit cards, medical bills, personal loans, old utility balances, and deficiency balances on repossessed cars usually disappear. Congress, however, wrote a list of exceptions into 11 U.S.C. § 523(a), and a few of those exceptions come up in almost every New York City case. Before you file, you need to know which of your debts will survive, because that answer often decides which chapter you file, when you file, and what you do about the debts that remain.

How the Discharge Works and Where the Exceptions Come From

In a Chapter 7 case, the discharge is granted under 11 U.S.C. § 727 and normally arrives about 60 to 90 days after the § 341 meeting of creditors. In a Chapter 13 case, the discharge is granted under 11 U.S.C. § 1328(a) after you complete your three- to five-year plan. Once the discharge order is entered, 11 U.S.C. § 524(a)(2) bars any creditor from trying to collect a discharged debt as a personal liability. A creditor who sends collection letters or continues a Civil Court lawsuit on a discharged debt can be held in contempt and ordered to pay damages and attorney fees.

The discharge does not reach every debt. Section 523(a) lists nineteen categories that are excepted. Section 1328(a) incorporates some of those categories into Chapter 13 and leaves others out, which is why Chapter 13 is sometimes called a "super discharge." The differences matter, and we cover them in the comparison table below.

New York City debtors file in one of two federal courts. Residents of Manhattan and the Bronx file in the Southern District of New York. Residents of Brooklyn, Queens, and Staten Island file in the Eastern District of New York. Both courts apply the same Bankruptcy Code, but each has local rules and judges with their own approach to dischargeability litigation.

Two Kinds of Exceptions: Automatic and Creditor-Initiated

The nineteen exceptions fall into two groups, and the procedural difference between them is significant.

Self-executing exceptions: Most categories, including taxes, support, student loans, fines, and drunk-driving injuries, are excepted from discharge automatically. The creditor does not have to do anything during the bankruptcy case. Under Fed. R. Bankr. P. 4007(b), a complaint to determine whether one of these debts is discharged can be filed at any time, even years later in a state court collection action.

Creditor-initiated exceptions: Three categories, fraud under § 523(a)(2), fiduciary defalcation or embezzlement under § 523(a)(4), and willful and malicious injury under § 523(a)(6), work the other way. Under 11 U.S.C. § 523(c)(1), these debts are discharged unless the creditor files an adversary proceeding and wins. Fed. R. Bankr. P. 4007(c) sets the deadline: 60 days after the first date set for the § 341 meeting. The deadline is strict. A creditor who misses it loses the objection, and the debt is discharged with everything else.

A worked example: you file a Chapter 7 petition on March 3, 2025. The court schedules your § 341 meeting for April 7, 2025. A credit card issuer that believes you ran up charges without intending to repay must file its adversary complaint by June 6, 2025. If the issuer instead sends a letter in July claiming fraud, the debt is already gone, and the letter itself may violate § 524.

Tax Debts

Tax debt is the most commonly misunderstood category. Many people assume no tax is ever dischargeable. The rule under § 523(a)(1) is narrower. Income taxes owed to the IRS, the New York State Department of Taxation and Finance, or the City (New York City personal income tax is collected by the State) can be discharged if all of the following are true:

• Three-year rule: The return for that tax year was last due, including any extension, more than three years before the petition date. 11 U.S.C. § 507(a)(8)(A)(i).
• 240-day rule: The tax was assessed more than 240 days before the petition date, with that period extended for any time an offer in compromise was pending plus 30 days. § 507(a)(8)(A)(ii).
• Two-year rule: You actually filed a return, and you filed it more than two years before the petition date. § 523(a)(1)(B).
• No fraud: The return was not fraudulent, and you did not willfully attempt to evade the tax. § 523(a)(1)(C).

Applying the rules: your 2021 New York State income tax return was due April 18, 2022. You filed it on time but could not pay. The State assessed the balance in June 2022. If you file bankruptcy on April 21, 2025 or later, the 2021 tax is more than three years old, was assessed more than 240 days ago, and was filed more than two years ago. It is dischargeable. If you had requested an extension to October 17, 2022, the three-year clock runs from that date, and you would need to wait until October 18, 2025. Filing one week early can turn a dischargeable tax into a priority debt you must pay in full.

Some tax debts never qualify. Trust fund taxes, such as sales tax collected from customers and payroll withholding, are excepted under § 507(a)(8)(C) regardless of age. Real property taxes on a New York City home are treated differently: unpaid property taxes are a lien on the property, and the lien survives even if your personal liability is discharged. A debt you incurred to pay a nondischargeable tax, such as a credit card cash advance used to pay the IRS, is itself nondischargeable under § 523(a)(14).

Even when income tax is nondischargeable, Chapter 13 gives you a way to pay it over up to five years without further penalties and with interest halted on unsecured priority claims. Your income relative to the household median will affect which chapter is available; see our page on the New York City bankruptcy means test.

Domestic Support and Divorce Obligations

Child support and spousal maintenance are "domestic support obligations" as defined in 11 U.S.C. § 101(14A). They are nondischargeable in every chapter under § 523(a)(5) and § 1328(a)(2). Arrears owed to the New York City Office of Child Support Services, whether the arrears were assigned to the City because the child received public assistance or are owed directly to the other parent, fall in this category. In Chapter 13, current support must be paid in full through or alongside the plan, and you must certify under § 1328(a) that you are current on post-petition support before the discharge is granted.

Divorce obligations that are not support work differently. Section 523(a)(15) covers debts owed to a former spouse under a divorce judgment or settlement agreement that are not support: an equalizing payment, an obligation to pay a joint credit card, or a share of a retirement account not yet transferred. These are nondischargeable in Chapter 7. They are dischargeable in Chapter 13, because § 1328(a) does not incorporate § 523(a)(15). For a debtor with a large property settlement obligation and a manageable income, that single difference can justify a Chapter 13 filing.

Student Loans and the Brunner Test

Section 523(a)(8) excepts federal student loans, loans guaranteed by a governmental unit or nonprofit, and "qualified education loans" under the Internal Revenue Code, unless excepting the debt "would impose an undue hardship on the debtor and the debtor's dependents." The bankruptcy courts in New York apply the three-part test from Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987). You must prove:

1. You cannot maintain a minimal standard of living for yourself and your dependents if forced to repay the loans;
2. Additional circumstances indicate this state of affairs is likely to persist for a significant portion of the repayment period; and
3. You have made good faith efforts to repay the loans.

The undue hardship finding is not automatic. You must file an adversary proceeding, a separate lawsuit inside your bankruptcy case, and serve the lender. For federally held loans, the Department of Justice and the Department of Education adopted guidance in November 2022 that allows the debtor to submit a standardized attestation form; the government attorney then evaluates the case against the guidance and may stipulate to a full or partial discharge without a trial. That process has made hardship discharges more attainable for debtors on fixed incomes, including many older borrowers and disabled veterans. Private loans are not covered by the guidance, and some private loans, such as bar exam loans or loans exceeding the cost of attendance, may not be "qualified education loans" at all and can be discharged without any hardship showing.

A student loan that is not discharged is still affected by the case. In Chapter 13, the automatic stay stops collection, wage garnishment, and Treasury offsets for the life of the plan, and you pay the loan pro rata with other unsecured creditors. When the plan ends, the balance resumes.

Debts Incurred Through Fraud or Recent Charges

Section 523(a)(2)(A) excepts debts obtained by "false pretenses, a false representation, or actual fraud." Section 523(a)(2)(B) covers debts obtained through a materially false written statement about your financial condition, such as an inflated income figure on a loan application, if the creditor reasonably relied on it and you intended to deceive.

Section 523(a)(2)(C) creates two presumptions of fraud that catch ordinary consumers:

• Luxury goods and services: Consumer debts owed to a single creditor totaling more than $800 for luxury goods or services incurred within 90 days before filing are presumed nondischargeable.
• Cash advances: Cash advances totaling more than $1,100 under an open-end credit plan obtained within 70 days before filing are presumed nondischargeable.

These dollar figures are adjusted every three years under 11 U.S.C. § 104, so confirm the current amounts before filing. The presumption is rebuttable, and a creditor must still bring an adversary proceeding within the Rule 4007(c) deadline. In practice, though, a $1,500 cash advance taken six weeks before the petition invites an objection. If you have made large charges recently, waiting past the 70- or 90-day window before filing usually removes the problem. Where waiting is impossible because a wage garnishment or eviction is imminent, our page on emergency bankruptcy filings explains how the timing trade-offs are handled.

Fines, Penalties, Restitution, and Parking Tickets

Section 523(a)(7) excepts fines, penalties, and forfeitures payable to a governmental unit that are not compensation for actual pecuniary loss. Criminal fines and surcharges imposed by a New York court, Department of Buildings and Environmental Control Board violations, and New York City parking and camera tickets owed to the Department of Finance all fall within this section in Chapter 7. Criminal restitution is separately excepted under § 523(a)(13) and § 1328(a)(3).

Chapter 13 treats non-criminal government fines differently. Section 1328(a) does not incorporate § 523(a)(7). A debtor with thousands of dollars in parking judgments or Environmental Control Board penalties can pay them as general unsecured claims in a Chapter 13 plan, often at pennies on the dollar, and discharge the balance at completion. Criminal fines and restitution ordered as part of a sentence remain nondischargeable under § 1328(a)(3) regardless of chapter.

Injuries Caused Willfully or While Driving Intoxicated

Two exceptions address personal injury judgments. Section 523(a)(6) excepts debts for "willful and malicious injury" to another person or their property, such as a judgment for assault or intentional destruction of a landlord's property. The creditor must prove you intended the injury, not merely the act; a negligence judgment does not qualify. This exception requires a timely adversary proceeding under § 523(c). In Chapter 13, only willful and malicious injuries causing personal injury or death are excepted under § 1328(a)(4); property damage judgments are dischargeable.

Section 523(a)(9) excepts debts for death or personal injury caused by operating a vehicle, vessel, or aircraft while intoxicated under applicable law. In New York, that means a violation of Vehicle and Traffic Law § 1192. This exception is self-executing, requires no adversary proceeding, and applies in both Chapter 7 and Chapter 13.

Condo and Co-op Charges After Filing

Section 523(a)(16) excepts condominium common charges and cooperative maintenance that become due after the petition date, for as long as you or the trustee hold a legal or equitable interest in the unit. Charges that accrued before filing can be discharged, but the condo board or co-op corporation ordinarily holds a lien on the unit for those arrears, and the lien survives. A co-op corporation also has the proprietary lease, and a default under that lease can lead to termination and a sale of the shares. If you intend to keep the apartment, you must keep paying current charges from the petition date forward. Our pages on condo owners in bankruptcy and co-op apartments in bankruptcy cover how arrears are handled in each chapter.

Debts You Fail to List and Debts From a Prior Case

Section 523(a)(3) excepts debts you did not list in your schedules if the omission prevented the creditor from filing a timely proof of claim or, for fraud-type debts, a timely dischargeability complaint. In a no-asset Chapter 7 case, where no claims bar date is set, the Second Circuit and courts in both New York districts generally hold that an omitted ordinary debt is still discharged, because the creditor lost nothing by not being listed. Do not rely on that rule. List every creditor, including collection agencies, judgment creditors, and anyone who has sued you in Civil Court. Omitting a creditor who later claims fraud gives that creditor an opening to litigate years after your case closes.

Section 523(a)(10) excepts debts that were or could have been listed in a prior case in which you were denied a discharge under § 727 or waived it. If a prior Chapter 7 discharge was denied because of concealed assets or false statements, those debts remain with you permanently.

Chapter 7 and Chapter 13 Compared

Secured Debts and Liens Survive the Discharge

The discharge eliminates personal liability. It does not remove liens. A mortgage on a Queens two-family house, a car loan, a judgment lien docketed against real property, or a tax lien filed by the State remains enforceable against the collateral after the case closes. In a Chapter 7 case, you can keep the property by continuing to pay, or you can surrender it and walk away without a deficiency. A reaffirmation agreement under § 524(c) restores personal liability and should be signed only when there is a specific reason to do so. Which property you can protect from the trustee is governed by New York's exemption statutes, covered on our bankruptcy exemptions page.

Planning Around Nondischargeable Debt

Knowing that a debt will survive is not a reason to abandon bankruptcy. It is a reason to plan the case. Before filing, we review each tax year against the three-year, 240-day, and two-year rules and, where a few months of waiting would convert a priority tax into a dischargeable one, we advise waiting. We check recent credit card activity against the § 523(a)(2)(C) windows. We compare Chapter 7 and Chapter 13 for divorce obligations, parking judgments, and property-damage claims that only Chapter 13 will discharge. For student loans, we evaluate the Brunner factors and, for federal loans, prepare the attestation that the government now reviews. After the discharge, we pursue creditors who keep collecting on discharged debts in violation of § 524.

You can contact the Law Offices of Albert Goodwin by phone at 212-233-1233 or by email at [email protected].