Which Debts are Not Dischargeable in Japanese Individual Bankruptcy?

For individuals in Japan navigating the complexities of personal bankruptcy (自己破産 - jiko hasan), the prospect of obtaining a discharge of debts (menseki - 免責) offers a critical pathway to a financial "fresh start." A discharge order, once granted by the court, releases the debtor from the legal obligation to repay most of their outstanding pre-bankruptcy debts. However, this relief is not all-encompassing. Japanese bankruptcy law specifically designates certain categories of claims as "non-dischargeable" (非免責債権 - hi-menseki saiken). Debtors remain personally liable for these particular obligations even after successfully completing the bankruptcy process and receiving a general discharge.

Understanding which debts fall into this non-dischargeable category is essential for both debtors, to have a realistic view of their post-bankruptcy financial landscape, and for creditors, to ascertain which of their claims might survive the bankruptcy. These exceptions to discharge are outlined in Article 253, Paragraph 1 of the Japanese Bankruptcy Act (破産法 - Hasan Hō).

The General Effect of a Discharge Order

An Order Granting Discharge (menseki kyoka kettei), once it becomes final and binding, absolves the individual debtor from responsibility for their "bankruptcy claims" (hasan saiken). These are generally monetary claims that arose from causes existing before the commencement of the bankruptcy proceedings. However, this powerful relief is explicitly limited by the statutory list of non-dischargeable claims.

Categories of Non-Dischargeable Claims (非免責債権 - Hi-Menseki Saiken)

Article 253, Paragraph 1 of the Bankruptcy Act enumerates seven categories of claims that are not extinguished by a general discharge order:

1. Tax Claims and Similar Public Dues (Item 1: 租税等の請求権 - Sozei tō no Seikyūken)

• Scope: This is a broad category encompassing most obligations owed to national and local government entities. It includes:
  • National taxes (e.g., income tax, consumption tax, inheritance tax, gift tax).
  • Local taxes (e.g., resident tax, fixed asset tax, automobile tax).
  • Social insurance premiums (e.g., for health insurance, pension).
  • Other public dues collected in a manner similar to taxes.
• Rationale: There is a strong public policy interest in ensuring the collection of taxes and public dues, which fund essential government services. Bankruptcy is not intended to allow individuals to evade these fundamental civic obligations.

2. Claims for Damages Arising from Torts Committed by the Debtor with Malicious Intent (Item 2: 破産者が悪意で加えた不法行為に基づく損害賠償請求権 - Hasansha ga Akui de Kuwaeta Fuhō Kōi ni Motzuku Songai Baishō Seikyūken)

• Scope: This exception applies to claims for damages resulting from wrongful acts (torts) committed by the debtor where "malicious intent" (akui - 悪意) was present.
• Interpretation of "Malicious Intent": "Malicious intent" in this context generally signifies more than mere negligence or carelessness. It typically implies an active intent to harm another person or their property, or a reckless disregard for the rights and safety of others that is so severe it approaches intentional wrongdoing. It suggests a culpable state of mind.
• Examples: Damages arising from deliberate fraud, embezzlement, intentional destruction of property, or certain types of defamation if committed with proven malice. Ordinary negligence (e.g., a typical car accident caused by simple driver error without aggravating factors) would generally result in a dischargeable debt.
• Rationale: The law seeks to prevent debtors from using bankruptcy to escape liability for intentionally or maliciously inflicted harm.

3. Claims for Damages from Torts Harming Life or Body, Committed Intentionally or by Gross Negligence (Item 3)

• Scope: This specifically addresses claims for damages where the debtor's tortious conduct, committed either intentionally (故意 - koi) or through gross negligence (重大な過失 - jūdai na kashitsu), resulted in harm to another person's life or physical well-being.
• Interpretation of "Gross Negligence": Gross negligence is a higher degree of fault than ordinary negligence. It implies a serious lack of care or a reckless indifference to the safety of others, falling short of intentional harm but significantly exceeding simple carelessness.
• Examples: Damages resulting from a drunk driving accident causing injury or death, severe injuries caused by reckless endangerment of others, or medical malpractice involving a blatant disregard for patient safety.
• Rationale: There is a compelling public interest in ensuring that victims of serious physical harm caused by such egregious conduct are compensated, and that debtors cannot easily shed these responsibilities through bankruptcy.

4. Certain Family Law Obligations (Item 4: 身分法上の義務に係る請求権 - Mibunhō-jō no Gimu ni Kakaru Seikyūken)

This category protects various financial obligations arising from family relationships, underscoring the societal importance of these duties. Key examples include:

• (a) Costs of Cohabitation Between Spouses (婚姻費用分担義務 - kon-in hiyō buntan gimu): Financial obligations between spouses for shared living expenses, typically arising during periods of separation prior to divorce.
• (b) Child Support / Child-Rearing Expenses (子の監護に関する義務 - ko no kango ni kansuru gimu, commonly referred to as 養育費 - yōikuhi): The ongoing obligation of a parent to provide financial support for their minor children. This is very strongly protected and almost universally non-dischargeable.
• (c) Duty to Support Certain Relatives (扶養の義務 - fuyō no gimu): Legally mandated obligations to provide financial support to certain close relatives (e.g., elderly parents, dependent siblings) if they are in need and the debtor has the capacity to provide support, as defined by family law.
• (d) Similar obligations based on family law principles.
• Rationale: Reflects the strong public policy imperative to protect the financial well-being of family members, particularly dependent children and spouses.

5. Claims of Employees of the Bankrupt Debtor (Item 5: 雇用関係に基づいて生じた使用人の請求権等 - Koyō Kankei ni Motzuite Shōjita Shiyōnin no Seikyūken tō)

• Scope: This applies if the bankrupt individual was an employer. It covers:
  • Claims for wages and other remuneration owed by the bankrupt individual to their employees.
  • Claims for the return of any security deposits (預り金 - azukarigane) or surety money that employees might have lodged with their individual employer.
• Rationale: Protection of workers' earnings and funds entrusted to their employer. (Note: If the employer is a bankrupt corporation, employee wage claims are handled through the priority system within the corporate bankruptcy, and the corporation itself is dissolved, not discharged. This non-dischargeability provision specifically applies to an individual bankrupt who had employees.)

6. Claims Knowingly and Improperly Omitted from the Creditor List (Item 6)

• Scope: If the debtor was aware of a specific creditor and their claim but, with intent to deceive or through gross negligence (or without justifiable reason, depending on interpretation), failed to include that creditor in the schedule of creditors (債権者名簿 - saikensha meibo) submitted to the bankruptcy court, AND that creditor consequently did not have knowledge of the bankruptcy proceedings (and thus had no opportunity to participate or file a claim).
• Rationale: This provision is designed to ensure the debtor's duty of full and honest disclosure. It prevents debtors from selectively excluding certain creditors from the bankruptcy process in an attempt to avoid the discharge of those specific debts while benefiting from discharge against others.
• Burden of Proof: The creditor alleging such omission and lack of knowledge typically bears the burden of proving these elements.

7. Fines, Certain Penalties, etc. (Item 7: 罰金等の請求権 - Bakkin tō no Seikyūken)

This category includes a range of pecuniary sanctions and public levies that are not dischargeable:

• Fines (罰金 - bakkin): Monetary penalties imposed as part of a criminal sentence.
• Minor Non-Penal Fines (科料 - karyō): Lesser monetary penalties, often for minor infractions.
• Court Costs in Criminal Cases (刑事訴訟費用 - keiji soshō hiyō).
• Certain Administrative Monetary Penalties (過料 - karyō): For violations of administrative regulations.
• Tax Collection Costs / Surcharges for Delinquency (追徴金 - tsuichōkin): Specific charges related to the collection of overdue taxes.
• Rationale: These are generally considered punitive, related to public order, or are costs associated with the justice system. Bankruptcy is not intended as a means to evade these types of state-imposed sanctions.

Consequences of a Debt Being Non-Dischargeable

When a debt is determined to be non-dischargeable:

• Continuing Liability: The individual debtor remains personally liable for that specific debt even after receiving a general discharge order for their other, dischargeable bankruptcy claims.
• Resumption of Collection: Creditors holding non-dischargeable claims can continue or initiate collection efforts against the debtor's post-bankruptcy assets and income. The discharge order provides no defense against these specific claims.
• Payment Arrangements: The debtor will need to make arrangements to pay these non-dischargeable debts over time, as they are not wiped clean by the bankruptcy.

The Role of the Bankruptcy Trustee Regarding Non-Dischargeable Claims

The bankruptcy trustee's primary focus is on administering the bankruptcy estate for the benefit of creditors with dischargeable "bankruptcy claims." While the trustee doesn't directly enforce or collect non-dischargeable claims post-discharge (that's up to the specific creditor and the debtor), their work during the bankruptcy can intersect with these claims:

• Identification: The trustee, in reviewing the debtor's liabilities, may identify claims that are likely to be non-dischargeable. They may inform the debtor about the nature of these debts.
• Information for Creditors: Information provided by the trustee (e.g., in reports or at creditors' meetings) might assist creditors in understanding the status of different types of claims.
• Impact on Overall Financial Picture: The existence of significant non-dischargeable debts is part of the debtor's overall financial reality that the trustee considers when assessing the debtor's situation for matters like discharge eligibility (especially concerning the debtor's future prospects for rehabilitation).

However, the ultimate determination of whether a specific claim is non-dischargeable, if disputed, may require a separate judicial decision, sometimes in litigation between the creditor and the debtor outside the main bankruptcy discharge hearing.

Conclusion

The discharge of debts (menseki) under Japanese individual bankruptcy law provides a powerful mechanism for debtors to achieve a fresh financial start. However, this relief is not absolute. The Bankruptcy Act carefully carves out specific categories of non-dischargeable claims (hi-menseki saiken) for which the debtor remains liable. These exceptions primarily reflect overriding public policy considerations, such as the need to collect taxes, compensate victims of serious or malicious wrongdoing, uphold family support obligations, and ensure the integrity of the bankruptcy process itself. For individuals contemplating bankruptcy in Japan, it is crucial to understand not only the benefits of discharge but also the scope of these enduring non-dischargeable obligations.