The debtor will receive a discharge after completing all payments under the chapter 12 plan as long as the debtor certifies (if applicable) that all domestic support obligations that came due before making such certification have been paid.

Effect of the Discharge

The discharge has the effect of releasing the debtor from all debts provided for by the plan allowed under section 503 or disallowed under section 502, with limited exceptions. Those creditors who were provided for in full or in part under the plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.

Non-Dischargeable Debts

Certain categories of debts are not discharged in chapter 12 proceedings. Those categories include

• Debts for alimony and child support;
• Money obtained through filing false financial statements;
• Debts for willful and malicious injury to person or property;
• Debts for death or personal injury caused by the debtor's operation of a motor vehicle while the debtor was intoxicated; and
• Debts from fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny.

The bankruptcy law regarding the scope of a chapter 12 discharge is complex, however, and debtors should consult competent legal counsel in this regard prior to filing. Those debts which will not be discharged should be paid in full under a plan. With respect to secured obligations, those debts may be paid beyond the end of the plan payment period and, accordingly, are not discharged.

The Chapter 12 Hardship Discharge

The court may grant a "hardship discharge" to a chapter 12 debtor even though the debtor has failed to complete plan payments. Generally, a hardship discharge is available only to a debtor whose failure to complete plan payments is due to circumstances beyond the debtor's control and through no fault of the debtor. Creditors must have received at least as much as they would have received in a chapter 7 liquidation case, and the debtor must be unable to modify the plan. For example, 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 does not apply to any debts that are nondischargeable in a chapter 7 case.