By Keri P. Ebeck, Attorney and Ashley L. Sweeney, Attorney
Through the years, bankruptcy has become a powerful tool for debtors wanting to eliminate their debt. However, even though the bankruptcy tool is powerful, it is not invincible. Not all debts are discharged by bankruptcy. Although, the debts discharged vary under each chapter of the Bankruptcy Code, the most common type of dischargeable debt is credit card and other unsecured debt, unpaid medical and utility bills, and deficiency balances from repossession or foreclosure. Section 523(a) of the Code lists specific categories of debts which are not discharged by bankruptcy. Therefore, the debtor must still repay those debts even after filing.
Generally, the exceptions to dischargability apply automatically if the language prescribed by section 523(a) applies. The most common types of non-dischargeable debts include certain types of tax claims, debts not listed by the debtor on the paperwork the debtor must file with the court, debts for spousal or child support or alimony, debts for willful and malicious injuries to a person or property, debts owed to the government for fines and penalties, debts for most educational loans or benefit overpayments, debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated, debts owed to certain tax-advantaged retirement plans, and debts for certain condominium or cooperative housing fees. Debts dischargeable in a Chapter 13, but not in Chapter 7, include debts incurred to pay non-dischargeable tax obligations and debts arising from property settlements in divorce or separation proceedings.
Even some of the commonly discharged debts can become non-dischargeable due to certain exceptions. For example, even though credit card and unsecured debt is typically dischargeable, excessive credit card use in the months prior to a debtor filing his or her bankruptcy will turn that credit card use into a form of non-dischargeable debt. The creditor can and should challenge the debtor’s request to eliminate the entire balance on the credit card by alleging that the debtor never intended to pay for those purchases. Examples of excessive use include purchasing expensive vacations or high-priced merchandise prior to filing bankruptcy, i.e. what the Code classified as luxury items.
When reviewing claims associated with a hospital stay, doctor visits or ambulance service may be eliminated in bankruptcy through the debtor obtaining a bankruptcy discharge as most of these debts are classified as unsecured, but some exceptions do exist. For example, the United States Bankruptcy Court for the Eastern District of Kentucky has ruled that the wife of a nursing home resident was contractually bound through the home’s admissions agreement to apply for medical assistance on behalf of her husband and because she failed to do so, could not discharge the amount due to the nursing home through her bankruptcy. The Court found that her “failure to obtain the Medicaid benefits and the subsequent failure to meet the financial obligations for [her husband’s] care were a breach of her obligations under the admissions agreement as the party responsible for [her husband’s] financial assets and liabilities.” The Court held that the debt was non-dischargeable under Section 523 (a)(4) because of the defalcation by the Defendant. The Court defined defalcation as: “the willful neglect of one’s duty, even if not accompanied by fraud or embezzlement.” Had the debtor’s wife not violated the admissions agreement and properly sought the Medicaid benefits, the debtor’s wife may have been able to discharge the outstanding nursing home debt of her husband.
Every nursing home admissions agreement states that the responsible party is only responsible for making sure that the nursing home gets paid from the resident’s own funds. But then they typically go on to say that if the resident does not have sufficient funds, the responsible party will help apply for Medicaid and, if Medicaid does not pay, then the responsible party may be called to pay from their own funds. As a general principle of law, the adult child of a parent who receives medical care at a nursing home is not the guarantor of the parent’s medical debt, unless the adult child agreed to be the guarantor of the debt in the admissions agreement. However, certain states, such as Pennsylvania, have filial duty statutes that require adult children or other close relatives of an indigent person to provide financial support for that person. Thus, in states that have such laws, a child is responsible to pay for the medical debt of their parent if the parent does not have the funds to pay, even if the child did not guarantee the payment of such debt in the terms of the admissions agreement. If the child is found responsible for the medical debt of their parent, they may be able to discharge that debt with a bankruptcy, dependent upon the circumstances around how the debt was incurred. If the child had a fiduciary duty and failed to act, the debt may be deemed non-dischargeable, as held in In Re Plybon.
Although a debtor may try to discharge certain unsecured debts that they or relatives may have incurred, it does not mean the creditor should assume it to be discharged. The creditor may have certain rights under the Code to have the debt declared non-dischargeable. If there is a question on whether or not a debt is dischargeable, the creditor should seek legal advice immediately to protect any and all rights it may have.
Keri Ebeck is an attorney in Bankruptcy and Ashley Sweeney is an attorney in Consumer Collections, and both are located in the Pittsburgh office of Weltman, Weinberg & Reis Co., LPA. Keri can be reached at 412.338.7102 and email@example.com while Ashley can be reached at 412.338.7147 and firstname.lastname@example.org.
 See 11 U.S.C.S. §523 (2013).
 See id.
 See, e.g., Mercantile Bank v. Hoyle (In re Hoyle), (1995, BC DC Kan) 183 BR 635; In re Doggett, (1987, BC SD Ohio) 75 BR 789; In re Pozucek, (1987, BC ND Ill) 73 BR 110.
 In re Plybon (U.S. Bankr. E.D. Ky., No. 11–10146, March 9, 2012).
 62 Pa.C.S.. § 1973 (2013).
 See, e.g., Presbyterian Med. Ctr. v. Budd, 832 A.2d 1066, 1075 (stating that “[a] nursing home providing an indigent parent with shelter, sustenance, and care has sufficient ‘interest’ under 62 P.S. § 1973 to bring a support action against the parent’s child”); Albert Einstein Med. Ctr. v. Forman, 243 A.2d 181, 182 (Pa.Super. 1968) (permitting hospital to bring action against two children for unpaid medical bills of indigent mother).
 For example, the educational loan debt of an indigent child for which the mother cosigned would not be discharged by the mother’s bankruptcy.