How Does Chapter 13 Debt Discharge Work?

  • How Does Chapter 13 Debt Discharge Work?

How Does Chapter 13 Debt Discharge Work?

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Bankruptcy usually is related to debt discharge. There can be scenarios when the bankruptcy might result in zero or no discharge. However, many people would be spooked or wouldn’t believe it if they were told Chapter 13 could also lead to some debt discharge. Discharge by definition is a legal order issued usually by the bankruptcy court to eliminate or release the liability of a debt from the filer. To know about more bankruptcy terms log on to

Key differences in discharge obtained through Chapter 7 and Chapter 13

Chapter 13 aims at settling as many debts as possible using the potential of future consistent income. On the other hand, Chapter 7 is for people with extremely low or no income, who end up liquidating their assets to settle as many debts as possible. Chapter 7 often results in a higher discharge as the filer is usually poorer and might have only exempt assets which are usually not liquidated to suffice the debt. However, in the case of Chapter 13, the scope of repayment of the majority of debts remains higher as it is based on the future income of the applicant.

Super discharge!

There are scenarios where Chapter 13 can result in higher discharge than Chapter 7. Such discharge is often referred to as super discharge. It is based on different scenarios. This super discharge occurs if you have a secured loan for instance home or a car and the value of the same has been diminished significantly. If liquidating such assets result in a lower amount than the outstanding principal, the different amount is discharged, and you will continue paying revised EMI payments based on the newly conferred principal.

The phenomenon of the super discharge as explained is possible only under Chapter 13. Chapter 7 does not emphasize the restructuring of debts for essential or exempt assets like the home, car, or any other exempt asset, hence, it is not possible to avail of super discharge under Chapter 7. To know more tips and tricks of bankruptcy dial 888-297-6203 from Los Angeles, and Dallas, TX.