Chapter 13 Discharge
The bankruptcy law regarding the scope of the Chapter 13 discharge is complex and has undergone significant changes. Therefore, debtors should consult competent legal counsel before filing regarding the scope of the Chapter 13 discharge.
The discharge releases the debtor from all debts provided for by the plan or disallowed (under section 502), with limited exceptions. Creditors provided for in full or in part under the Chapter 13 plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged debts.
How Long Does Chapter 13 Discharge Take?
Discharging debt through Chapter 13 may take 6 to 8 weeks after the final payment is made on your 3 to 5-year repayment plan (whichever was approved by the bankruptcy court). Once the final payment is made, the discharge happens immediately; however, there are some items that the debtor must certify to ensure that the discharge paperwork is not delayed.
When Does a Chapter 13 Discharge Happen?
A debtor is entitled to a discharge after all payments under the Chapter 13 repayment plan are completed.
To ensure the discharge goes through and paperwork is not delayed, the debtor must:
- Certify (if applicable) that all domestic support obligations that came due before making such certification have been paid.
- Have not have received a discharge in a prior case filed within a specific time frame (two years for prior Chapter 13 cases and four years for prior Chapter 7, Chapter 11, and 12 cases).
- Have completed an approved course in financial management if the U.S. trustee or bankruptcy administrator for the debtor's district has determined that such courses are available to the debtor. (11 U.S.C. § 1328)
The court will not enter the discharge until it determines, after notice and a hearing, there is no reason to believe any pending proceeding might give rise to a limitation on the debtor's homestead exemption. (11 U.S.C. § 1328(h))
What Debts Can Be Discharged?
As a general rule, the discharge releases the debtor from all debts provided for by the plan or disallowed, except for certain debts referenced in 11 U.S.C. § 1328.
Debts not discharged in Chapter 13 include certain long-term obligations, such as:
- Home mortgage
- Debts for alimony or child support
- Certain taxes
- Most government-funded or guaranteed educational loans or benefit overpayments
- Debts arising from death or personal injury caused by driving under the influence
- Debts for restitution or a criminal fine included in a sentence on the debtor's conviction of a crime
To the extent that they are not fully paid under the Chapter 13 plan, the debtor will still be responsible for these debts after the bankruptcy case has concluded. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for 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 will be discharged unless a creditor timely files and prevails in an action to have such debts declared non-dischargeable. (11 U.S.C. §§ 1328, 523(c); Fed. R. Bankr. P. 4007(c))
The discharge in a Chapter 13 case is somewhat broader than in a Chapter 7 case. Debts dischargeable in Chapter 13 but not in Chapter 7 include debts for willful and malicious injury to property (as opposed to a person), debts incurred to pay non-dischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings. 11 U.S.C. § 1328(a).
The Chapter 13 Hardship Discharge
After confirmation of a plan, circumstances may arise that prevent the debtor from completing the plan. In such situations, the debtor may ask the court to grant a "hardship discharge." 11 U.S.C. § 1328(b).
Generally, such a discharge is available only if:
- The debtor's failure to complete plan payments is due to circumstances beyond the debtor's control and through no fault of the debtor.
- Creditors have received at least as much as they would have received in a Chapter 7 liquidation case.
- Modification of the plan is not possible.
Injury or illness that precludes employment sufficient to fund even a modified plan may serve as the basis for a hardship discharge. The hardship discharge is more limited than the discharge described above and does not apply to any non-dischargeable debts in a Chapter 7 case. (11 U.S.C. § 523)
We believe each client deserves outstanding service.
We provide free phone and virtual initial consultations.
We are caring, knowledgeable, and trustworthy.
We will work quickly and guide you every step of the way.