Chapter Thirteen Bankruptcy Discharge

by


The bankruptcy law regarding the scope of the chapter thirteen discharge has recently undergone major changes and is complex. Therefore, prior to filing, debtors should consult competent legal counsel regarding the scope of the chapter thirteen discharge.


A chapter thirteen debtor is entitled to a discharge upon completion of all payments under the chapter thirteen plan so long as the debtor: (1) certifies (if applicable) that all domestic support obligations that came due prior to making such certification have been paid; (2) has not received a discharge in a prior case filed within a certain time frame (2 years for prior chapter thirteen cases and 4 years for prior chapter seven, eleven and twelve cases); and (3) has completed an approved course in financial management (if the U.S. bankruptcy administrator or trustee for the debtor's district has determined that such courses are available to the debtor). 11 United States Code, Sub-Section- 1328. However, until it determines, the court will not enter the discharge, after notice and a hearing, that there is no reason to believe there is any pending proceeding that might give rise to a limitation on the debtor's homestead exemption. 11 United States Code, Sub-Section- 1328(h).

With limited exceptions, the discharge releases the debtor from all debts provided for by the plan or disallowed (under section 502). Creditors provided for in part or in full under the chapter thirteen plan may no longer continue or initiate any legal or other action against the debtor to collect the discharged obligations.

As a general rule, with the exception of certain debts referenced in 11 United States Code, the discharge releases the debtor from all debts provided for by the plan or disallowed. Sub-Section- 1328. Debts not discharged in chapter thirteen include certain long term obligations (such as a home mortgage), certain taxes, debts for child support or alimony, debts for most government guaranteed or funded educational loans or benefit over payments, debts arising from personal injury or death caused by driving under the influence of drugs or driving while intoxicated, and debts for a criminal fine or restitution included in a sentence on the debtor's conviction of a crime. The debtor will still be responsible for these debts after the bankruptcy case has concluded to the extent that they are not fully paid under the chapter thirteen plan. Debts for property or money obtained by false pretenses, debts for defalcation or fraud while acting in a fiduciary capacity, and debts for damages or restitution awarded in a civil case for malicious or willful actions by the debtor that cause death or personal injury to a person will be discharged unless a creditor timely files and prevails in an action to have such debts declared non dischargeable. 11 United States Code, Sub-Section- 1328, 523(c); Fed. R. Bankr. P. 4007(c).

The discharge in a chapter thirteen case is somewhat broader than in a chapter seven case. Debts dischargeable in a chapter thirteen, but not in chapter seven, include debts for malicious and willful injury to property (as opposed to a person), debts arising from property settlements in separation or divorce proceedings, and debts incurred to pay non dischargeable tax obligations. 11 United States Code, Sub-Section- 1328(a).

Circumstances may arise that prevent the debtor from completing the plan, after confirmation of a plan. The debtor may ask the court to grant a "hardship discharge" in such a situation. 11 United States Code, Sub-Section- 1328(b). Generally, such a discharge is available only if: (1) the debtor's failure to complete plan payments is due to circumstances through no fault of the debtor and beyond the debtor's control; (2) creditors have received at least as much as they would have received in a chapter seven liquidation case; and (3) modification of the plan is not possible. Illness or injury that precludes employment sufficient to fund even a modified plan may serve as the basis for a hardship discharge. The hardship discharge does not apply to any debts that are non dischargeable in a chapter seven case and is more limited than the discharge described above. 11 United States Code, Sub-Section- 523.

View the Chapter Thirteen Bankruptcy Topics

Learn the different Types Of Bankruptcy Cases

Although all information has been written in good faith and reviewed, please email us at [email protected] to report any inaccuracies.