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Debts and discharge
Debt
In the Bankruptcy Code, a debt is liability on a claim: if someone has a right to payment from you, you have a debt. 1 2
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The definition is as wide as the definition of a claim. A right to payment counts whether or not it has been reduced to a court judgment, and whether it is fixed or contingent, disputed or undisputed, secured or unsecured. 2
How a debt is classified decides how bankruptcy treats it. The same debt can fall into more than one group. 1 2
What it covers
| Group | What it means |
|---|---|
| Consumer debt 1 | A debt an individual took on mainly for a personal, family or household purpose, as opposed to business needs 1 |
| Secured debt 2 | A debt backed by a mortgage, a pledge of collateral or another lien, such as a home mortgage or a car loan 2 |
| Dischargeable debt 2 | A debt for which the Bankruptcy Code allows the debtor's personal liability to be eliminated 2 |
| Nondischargeable debt 2 | A debt that bankruptcy does not wipe out, such as child support, certain taxes and criminal restitution 2 |
Common questions
Is a debt I dispute still a debt in bankruptcy?
Does a discharge remove a lien?
Not necessarily. A secured creditor may still be able to take back the property that secures its loan after a discharge, even though the debtor's personal liability is discharged. 3
Sources
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