Debts that are discharged in Chapter 13, but not in Chapter 7

Some debts are discharged at the end of Chapter 13 case which cannot be discharged in a Chapter 7 bankruptcy. Chapter 13 is a payment plan bankruptcy, and creditors are repaid over three to five years. That’s a long time for a debtor to remain in bankruptcy, so Congress has placed a few “carrots” to entice individuals to file Chapter 13 and attempt to repay whatever he or she is able.

A list of nondischargeable debt is found in Section 523 of the Bankruptcy Code. All of the debts listed in that section are not dischargeable in a Chapter 7 or Chapter 11 individual case. Some attorneys less familiar with the Bankruptcy Code believe that debts excepted by Section 523 are also excepted in Chapter 13 cases. Well, some are, but Chapter 13 has its own section that identifies nondischargeable debts: Section 1328. This specific section applies only to Chapter 13 cases and supersedes the general provisions in Section 523 that apply to all cases. Bankruptcy attorneys refer to these differences as part of Chapter 13’s “Super Discharge.”

Debts that are not dischargeable in Chapter 7, but can be discharged in Chapter 13 bankruptcy include:

• willful and malicious injury by the debtor to another entity or to the property of another entity [11 USC § 523(a)(6)]
• civil fines and penalties [11 USC § 523(a)(7)]
• debts that couldn’t be discharged in a previous bankruptcy [11 USC § 523(a)(10)]
• debts incurred to pay a nondischargeable tax debt [11 USC § 523(a)(14) and (14a)]
• marital debts created in a divorce or settlement agreement [11 USC § 523(a)(15)]
• condominium, cooperative, and home­owners’ association fees incurred after the bankruptcy filing date [11 USC § 523(a)(16)], and
• debts for loans from a retirement plan [11 USC § 523(a)(18)].

The Bankruptcy Code contains general rules on discharging debts, but applying these rules to the specifics of an individual’s bankruptcy case can mean the difference between a fresh start and a false start. You need an experienced attorney on your side to apply the rules and ensure that you obtain the full benefits of the bankruptcy laws.