What Debts are Discharged in Chapter 13 Bankruptcy?

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Chapter 13 bankruptcy is available to debtors who have regular and reliable income for at least 6 months prior to filing the bankruptcy petition. Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy is a repayment plan that allows a debtor to keep the majority of her assets while she makes monthly payments to the bankruptcy trustee for the term of the plan. A Chapter 13 repayment plan lasts between 3 to 4 years. The bankruptcy trustee then distributes the payments to the debtor’s creditors. As long as the debtor makes all payments on time and completes the repayment plan, her debts will be discharged.

Dischargeable Debts

In general, if the debtor completes the Chapter 13 repayment plan, then all debts included in the plan are discharged. To determine how much of actual debt is repaid in the repayment plan, the bankruptcy court looks at how much disposable income the debtor has each month after paying necessary expenses like a mortgage, car, and living expenses. The amount of disposable income remaining is paid to the debtor’s creditors in order of their priority. Unsecured creditors, like a credit card company, are paid the smallest percentage of the actual debt owed. Therefore, over the course of the Chapter 13 repayment plan, the debtor will not pay much towards certain debts. However, as long as the repayment plan is completed and all payments are made on time, the unpaid debt will be discharged. Dischargeable debts in Chapter 13 bankruptcy include medical bills, personal loans, utility bills and credit card bills. In addition, if a creditor does not respond to the bankruptcy court after receiving notice of the bankruptcy filing, the creditor loses all rights to be paid in the repayment plan.

Non-Dischargeable Debts

Not all debts are dischargeable following a bankruptcy. Congress excludes certain debts from being discharged in a bankruptcy proceeding for public policy reasons. For example, family support obligations including child support and spousal support are not dischargeable debts following a bankruptcy. A debtor must also continue to make family support payments during the repayment plan and not fall further behind. In addition, taxes and student loans are not dischargeable.

Getting Legal Help

Bankruptcy is a complex legal process. If you are thinking about filing for bankruptcy, contact a licensed and experienced bankruptcy attorney as soon as possible. A lawyer can explain the bankruptcy process to you and answer any questions you have about the dischargeability of your debts.

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