The Chapter 13 Debt Discharge
A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter 13 plan so long as the debtor:
- certifies (if applicable) that all domestic support obligations that came due prior to making such certification have been paid;
- has not received a discharge in a prior case filed within a certain time frame (two years for prior chapter 13 cases and four years for prior chapter 7, 11 and 12 cases); and
- has completed an approved course in financial management.
The court will not enter the discharge, however, until it determines, 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.
Effect of the Discharge
The discharge releases the debtor from all debts provided for by the plan or disallowed, 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 obligations.
As a general rule, the discharge releases the debtor from all debts provided for by the plan or disallowed, with the exception of certain debts referenced in the Bankruptcy Code. Debts not discharged in chapter 13 include certain long term obligations (such as a home mortgage), debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and 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 nondischargeable.
Chapter 13 Discharge vs. Chapter 7
The discharge in a chapter 13 case is somewhat broader than in a chapter 7 case. Debts dischargeable in a 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 nondischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings.
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." 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; and
- 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 debts that are non-dischargeable in a chapter 7 case.
- Exempt Property in a Chapter 13 Bankruptcy
- What are a Debtor's Obligations Under Chapter 13?
- Chapter 13: Repayment Plan and Confirmation Hearing