When a person files for bankruptcy under Chapter 13 of the United States Bankruptcy Code, a debtor will obtain a discharge of his or her debts after meeting all provisions set out in the Bankruptcy Code.
Provisions for obtaining a Chapter 13 Discharge
The court will discharge an individual’s qualifying debts after the debtor has made all payments to the court if the debtor can prove the following:
- The debtor has paid all domestic support obligations.
- The debtor has not received a discharge under Chapter 13 during the previous two years.
- The debtor has completed an approved course in financial management, if such a course was available to the debtor within the court’s district.
The discharge releases the debtor from any debts listed on the bankruptcy plan, and the creditors listed on the plan may not initiate any future attempts to collect on the debt owed to them by the debtor.
Debts not discharged under Chapter 13
There are a number of long term debts that do not qualify for fully discharge under Chapter 13. These debts often include:
- Mortgage payments
- Alimony or child support payments
- Student loan debts
- Tax debts
- Court-ordered payments from driving while intoxicated or under the influence of drugs.
- Debts from restitution payments stemming from the debtor’s criminal activity.
Unlike Chapter 7, Chapter 13 may allow a discharge of debts from malicious or willful damage to property, debts incurred to pay nondischargeable tax obligations, and debts from property settlements in divorce or legal separation proceedings.
In a few cases, the court may dismiss some debts because repayment would cause an undue hardship to the debtor. A debtor can receive a hardship discharge if he or she can prove the following:
- Circumstances beyond the debtor’s control, and by no fault of the debtor, will prevent him or her from repaying the debt.
- Creditors have received as much as they would have received in a Chapter 7 liquidation case.
- Modification of the existing repayment plan is not possible.
Typically, a court might award a hardship discharge if a debtor is unable to find steady employment due to chronic illness or injury. A hardship discharge does not cover debts that are considered nondischargeable under Chapter 7.
The United States Court system warns that the rules governing Chapter 13 bankruptcy discharge are complex, and that rules for filing Chapter 13 may continue to change. The courts advise an individual to consult an attorney before filing for Chapter 13 bankruptcy.