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Compared to Chapter 7, debts discharged under Chapter 13 are broader since they even wipe out nondischargeable debts of Chapter 7. Post the completion of the Repayment Plan, you will receive a discharge order which will clean off all balance of the qualifying debts.
Debts that are covered under Chapter 13
The basic deciding factor for dischargeability of the debt is whether it is a Secured debt or an unsecured debt. Unsecured debts are further sub-divided into Priority (These are not dischargeable and paid before the non-priority debts) and Non-priority Debts ( These are dischargeable and these are paid depending on the balance left after paying off other debts).
- Secured Debts – These are guaranteed by collateral. So, you need to pay or surrender the collateral if the collateral secures the obligation.
- Priority Unsecured Debt – These are non-dischargeable. You are liable to pay in Full
- Nonpriority Unsecured Debts – These are given preference based on the balance left. Categories that fit here – credit card bills, medical bills, Personal loans, Utility payments. Student loans are also included in this category, however, they are non-dischargeable unless proved in an adversary proceeding.
After your repayment plan under Chapter 13 is completed, most of your nonpriority unsecured debts will get discharged, with student loans being an exception.
Debts that qualify for Chapter 13
Listed below are the common non-priority unsecured debts-
- Medical Bills
- Credit Card Debts
- Personal loans that are not secured by a collateral
- Income tax balances and other tax obligations
- Breach of contract
- Negligence related debt
Debts that are dischargeable under Chapter 13 only
Below mentioned are some debts that can be discharged under the Chapter 13 bankruptcy plan, but not under Chapter 7.
- Willful and Malicious Property damage – Debts that have arisen due to willful and intentional damage of another person’s property, but do not include injury to another person.
- Debts incurred to pay non-dischargeable taxes – for example if you used your credit card (dischargeable debt) to pay tax obligation (non-dischargeable debt).
- Debts arising due to divorce or Separation – Non-dischargeable debts like Alimony or Child support can be discharged
- Post petition Homeowners Dues – Dues and taxes (property tax, utility bills) arising after foreclosure and before the transfer of Home’s title are dischargeable.
- Government Fines, Penalties, and Forfeitures – Excluding Restitution and Criminal Fine, other fines and obligations – city, state, or governmental agency fines are dischargeable.
- Bankruptcy case debts that unsuccessful – Excluding the particular debt declared by the judge as Non-dischargeable in Chapter 7. You can still get the remaining debts discharged even if you couldn’t pass the chapter 7 Means test.
- Other Unusual Debts – if you have committed a wrongful act against a federally insured bank or a credit union, or if you have pending court fees incurred by a prisoner or debts arisen from security law violations.
Under what circumstances will you receive Chapter 13 Discharge?
You will be liable to pay off a certain amount of your debts under the repayment plan depending on the type of debt. This will be calculated based on the value of the property, the income along with other expenses. Post this, you will receive the discharge.
To explain precisely, you have to pay the greater of –
- The disposable income
- Value of the non-exempt property.
The creditors are paid back based on the priority – Alimony, child support as well as taxes are always paid in full and prioritized. After that if any balance amount is left, it is used to pay off the non-priority debts.
A well-experienced attorney firm can walk you through all the steps easily so that once your repayment plan is over, no creditor can claim any amount from you. To get in touch – Call 888-297-6203.