Pre-Discharge Requirements for Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy, the goal is debt adjustment as opposed to the asset liquidation provided in a Chapter 7 plan. Chapter 13 allows the debtor to submit a repayment plan while retaining her/his/its assets. Payments are made to satisfy past due balances which are prioritized by the bankruptcy court. Repayment must be set in a statutory time period. Once specified Chapter 13 requirements have been met, the debtor may then receive a discharge.

Chapter 13 Bankruptcy Repayment Plan

Unlike a Chapter 7 bankruptcy, where assets are liquidated and the proceeds distributed to creditors, a Chapter 13 bankruptcy allows the debtor to retain his/her/its assets while adjusting outstanding debt. The purpose for a Chapter 13 bankruptcy is to help those who face financial problems to handle their debt and basically get their financial lives back in order.

In a Chapter 13 bankruptcy, the petitioner submits a repayment plan that averages between three to five years. During this time, the petitioner must keep payments current as well as satisfy past due balances. The bankruptcy court prioritizes the debts and creditors with secured interests must get paid first. Any remaining disposable income then goes toward satisfying unsecured creditors. This hierarchy is established by the Bankruptcy Code.

If all payments under the plan are made accordingly, then any unsecured debt that remains after the plan may be discharged.

Pre-Discharge Requirements under Chapter 13

Under Chapter 13, the discharge is broader than those provided by Chapter 7. A Chapter 13 petitioner is entitled to a discharge if:

1. the petitioner certifies that all domestic support obligations have been paid prior to certification;
2. the petitioner has not received a prior discharge filed within a certain time frame (usually two years for a prior chapter 13 or four years prior to a chapter 7, 11 or 12)
3. the petitioner has completed an approved financial management course (often referred to as "debtor education")

The discharge releases the debtor from any debt provided for under the plan or debt that is disallowed, with limited exceptions, under Section 502 of the Bankruptcy Code. After a discharge, creditors can no longer initiate or continue any action, legal or otherwise, to collect discharged obligations.

Debts not discharged under Chapter 13 include the following:

• any long-term obligations (for example, a home mortgage);
• alimony or child support;
• certain taxes;
• debts for certain government or guaranteed educational loans;
• benefit overpayments;
• debts that arise from death or personal injuries caused by a DUI; and
• criminal fines.

A debtor remains responsible for these debts even after the discharge.

The following debts may be discharged unless a creditor files a timely petition to have such debts declared non-dischargeable:

• debts for money or property obtained under false pretenses;
• debts arising from fraud while acting in the capacity of a fiduciary; and
• restitution debts or debts for damages awarded in a civil case arising from the debtor's willful or malicious acts that caused a personal injury or death.

To have these debts rendered non-dischargeable, the creditor must prevail in his/her/its action.

Talk with an Attorney

Bankruptcy requirements for a Chapter 13 discharge include full payments under the bankruptcy repayment plan as well as completion of a pre-approved financial management program. Additionally, you must not have been given a prior discharge within a certain number of years. Talk with an experienced bankruptcy attorney to discuss other requirements under a Chapter 13 bankruptcy.