The Chapter 13 Debt Discharge
After you have made all the payments laid out in your repayment plan, the bankruptcy judge will enter a Chapter 13 discharge order. This article provides an overview of how a Chapter 13 debt discharge works.
What Is a Chapter 13 Debt Discharge?
A Chapter 13 debt discharge is a court order releasing the debtor of all debts that are dischargeable. You don't have to pay back debts that have been discharged. Creditors are also prohibited from trying to collect debts after the case is finalized.
How Do You Get a Chapter 13 Debt Discharge?
If you filed for Chapter 13 bankruptcy, you will have to complete the payments outlined in your repayment plan. Additionally, you will also have to comply with the following before you can receive a discharge:
- Certify that you have paid all the domestic support obligations that apply to you
- Complete a course in financial management
- Show that you have not previously received a Chapter 13 bankruptcy discharge in the past two years
Before entering a discharge, the court will first see if there is a pending proceeding that may give rise to a limitation on your homestead exemption.
The Process of a Debt Discharge
The Chapter 13 debt discharge is basically a process whereby the debtor submits a plan to repay debts in exchange for forgiveness of certain debts and legal safeguards against repossession or foreclosure of their property.
Shortly after you file for a Chapter 13 bankruptcy, you will prepare a plan to repay your debts (the Chapter 13 repayment plan). The bankruptcy court will look at your plan and decide whether it is fair and in accordance with the law.
You will also need to work with a trustee who will distribute these payments to the creditors. The trustee will pay creditors according to priority. This means some debts like domestic support obligations and taxes will be paid in full while you may pay less than what you owe in other unsecured debts.
The judge will discharge your case once all the repayments are complete, which typically takes three to five years. At this point, the judge will discharge your remaining debts that qualify for discharge.
The Chapter 13 Hardship Discharge
Sometimes, a debtor runs into a situation that makes it impossible for them to continue with the repayment plan. In such situations, the debtor may be entitled to a hardship discharge.
For a court to approve a hardship discharge, you must show the following:
- It is impossible to modify the plan,
- You can't make the scheduled payments because of circumstances beyond your control, and
- Unsecured creditors have received at least as much as they would have received had the case been a Chapter 7 liquidation case
If you meet all the above criteria, the court may grant you a discharge without having to complete the payments under the proposed Chapter 13 plan. You should note, however, that this discharge doesn't apply to debts that are non-dischargeable in a Chapter 7 case.
Effect of the Discharge
After you finalize the payment outlined in your payment plan, you will get a Chapter 13 discharge. What this means is all your debts will be discharged with a few exceptions. Some of the debts that will not be discharged include:
- Child support and alimony payments
- Student loans
- Certain taxes
- Debts that arose from death or personal injury caused by driving under the influence of drugs or while intoxicated
- Debts for restitution
- Criminal fines
- Debts with long-term obligations like a mortgage
The following debts will also not be discharged according to 11 U.S.C. §§ 1328, 523(c):
- Money or property obtained by false pretenses
- Fraud or defalcation while acting in a fiduciary capacity
- Restitution or damages awarded in a civil case for willful or malicious actions by the debtor that cause personal injury or death to a person.
- Exempt Property in a Chapter 13 Bankruptcy
- Filing for Chapter 13: FAQ
- Chapter 13: Repayment Plan and Confirmation Hearing
Learn More About the Chapter 13 Debt Discharge From an Attorney
Bankruptcies frequently involve multiple classes of debts and a tangle of legal relationships with different parties. A lawyer can help you sort out your rights and simplify the process of identifying and satisfying your various obligations. Learn how an experienced, local bankruptcy attorney can help you successfully put your financial woes behind you.