Debt Settlement After Bankruptcy: Handling Debts Not Discharged

California Debt Settlement System | Justice Foundation

Not all debts are dischargeable in bankruptcy — and for debtors who have been through bankruptcy and still carry non-discharged obligations, traditional debt settlement strategies apply with some important modifications. Understanding which debts survived bankruptcy and how to address them systematically completes the financial recovery picture.

What Bankruptcy Doesn’t Discharge

Chapter 7 bankruptcy discharges most unsecured consumer debts — credit cards, medical bills, personal loans, and most other consumer debt. Non-dischargeable debts include: student loans (federal and most private, absent undue hardship discharge), recent income tax debts (generally taxes owed for the past 3 years), child support and alimony obligations, debts arising from fraud or willful misconduct, and certain fines and penalties. If any of these remain after your bankruptcy discharge, they require separate resolution strategies.

Student Loans Post-Bankruptcy

Federal student loans remaining after bankruptcy are addressed through the income-driven repayment and forgiveness system — not traditional settlement. Contact your loan servicer about income-driven repayment plans (SAVE, PAYE, IBR) that cap payments at a percentage of discretionary income with forgiveness after 20-25 years. For private student loans that survived bankruptcy, standard debt settlement strategies apply — SOL analysis, debt buyer purchase price economics, and the negotiation framework from the May series.

Tax Debts Post-Bankruptcy

Tax debts not discharged in bankruptcy may be addressed through IRS Offer in Compromise or installment agreements with the IRS or California FTB. Both agencies have hardship programs for taxpayers who cannot pay the full amount owed. An Offer in Compromise — requiring demonstration that the offered amount is the most the government can reasonably collect — is essentially the government’s version of debt settlement. The Justice Foundation kit covers post-bankruptcy resolution strategies for each category of non-dischargeable debt.