Arguably the biggest advantage of Chapter 13 bankruptcy is that it allows for a large portion of debts to be fully or partially discharged, once the repayment period is over. However, most filers are unaware of the full extent of the possibility of this approach.
Today, we’ll explore several avenues of Chapter 13 discharges, giving you a comprehensive overview of different legal options and benefits achievable through this process. Do note that this guide will give you a solid baseline, but seeking the assistance of an experienced Ch 13 bankruptcy attorney in San Diego is still highly recommended.
What kind of discharge is Chapter 13?
- Definition: Chapter 13 discharge is a formal, legal release issued by the Bankruptcy Court in its respective State.
This document confirms that you’ve successfully met the terms and conditions of your Chapter 13 bankruptcy repayment agreement. In simpler terms, it means that you’ve repaid your debt in full and that you have no further obligations toward creditors.
In addition, the Ch13 discharge also forgives any remaining qualified debt, with limited exceptions. This means that you’re no longer legally obligated to repay any of these debts, under any circumstances.
Finally, the discharge effectively acts as a “full-stop” order for creditors. Under 11 U.S. Code § 1328 section 502, “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.”
What gets discharged in Chapter 13?
In bankruptcy, debts generally fall into one of three categories: secured, priority unsecured, and non-priority unsecured debts. These categories signify whether the debt must be repaid or it is eligible for discharge.
In Chapter 13, most non-priority unsecured debts typically qualify for a full or partial discharge. The most commonly discharged debts are:
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- Credit card debts – outstanding balance(s) on your credit card(s)
- Medical bills – debts owed for medical services, treatments, rehab, etc.
- Personal loans – loans not backed by a collateral
- Past due utility bills – water, electricity, gas, etc.
- Older (non-priority) taxes – e.g. taxes due more than three years before you’ve filed for bankruptcy
- Past due lease payments – for property or vehicles
- Most lawsuit judgments – judgments resulting from lawsuits pertaining to any of the above (i.e. credit card debts, medical bills, personal loans, etc.)
In addition, Chapter 13 also allows certain secured debts, namely mortgages and car loans, to be “crammed down” or “stripped”, under specific conditions. If your repayment plan covers the arrears, the loan can be split into secured and unsecured portions. After the plan is repaid, the unsecured portion may be eligible for discharge. Do note, however, that Ch 13 cramdown does not strip the lien from your property or vehicle – it removes only the unsecured portion.
Finally, it can be advantageous to note that there are certain dischargeable debts “exclusive” to Chapter 13 bankruptcy only. These include (but are not limited to):
- Debts incurred through wilful and malicious damage to property
- Debts used to pay non-dischargeable tax obligations (e.g. recent income taxes, taxes from non-filed, late, or fraudulent returns, certain property taxes, etc.)
- Debts from property settlements in divorce or separation (excluding alimony and child support)
- Outstanding debts from previously denied bankruptcy discharge
- Loans from retirement accounts
- HOA or condominium fees due after filing for bankruptcy
- Certain government fines and penalties (excluding criminal fines).
Where to find the leading Ch 13 bankruptcy attorney near me in San Diego?
Whether you’re seeking help with filing your claim or wish to end your Chapter 13 plan early, Bankruptcy Law Offices of Mark L. Miller stands ready to offer expert guidance. With extensive experience and a long-term presence on the San Diego scene, our lawyers possess intimate knowledge of the legal landscape of the entire region, from North City to San Ysidro and beyond.
You can rest assured that, once you partner with us, we’ll put all of it to good use, providing you with sound strategies tailored to your unique situation. Connect with us today and let us guide you toward a better, stable future!