What Happens at the End of a Chapter 13 Bankruptcy?
After completing a Chapter 13 repayment period that lasts a minimum of three years and a maximum of five, most debtors receive a discharge from the bankruptcy court. Section 1328 of the Bankruptcy Code sets out the discharge eligibility of a Chapter 13 debtor. This section states that a Chapter 13 debtor is entitled to a discharge upon completion of all payments under the Chapter 13 repayment 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 discharge injunction stops creditors from seeking payment from the debtor for all debts provided for by the plan or disallowed under Section 502, with limited exceptions. Discharged creditors 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 Section 1328. Debts not discharged in Chapter 13 include certain long term obligations (such as a home mortgage), Domestic Support debts such as alimony or child support, some taxes, most student loans, debts arising from death or personal injury caused by driving while intoxicated, and debts for restitution or a criminal fine. 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.
Certain debts are discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable, including:
- 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.
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.