Do you know what a chapter 13 discharge is or what steps to take when filing? Let’s take a deep dive into what you need to know.
Do you have an active and open Chapter 13 bankruptcy and want to know what happens next? Do you need further guidance on what to expect after filing for the discharge?
Did you know that over 65% of Chapter 13 plans fail due to bad planning or inaccurate representation? If you have successfully completed your repayment plan, congratulations!
Now you are ready to file for a discharge. This article will go over what happens after you file a Chapter 13 discharge and who you can contact for additional help.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is also called a reorganization bankruptcy. A court-appointed trustee administers you a repayment plan that is between 36 and 60 months.
As the debtor, you pay a certain amount to the trustee each month, and the trustee pays your creditors on your behalf. You may be eligible for a Chapter 13 discharge after making all of your payments.
Chapter 13 Discharge
A Chapter 13 discharge is a court order that releases you from all dischargeable debts. You don’t have to pay back those debts once they are discharged.
Your creditors also cannot come after you once the case is complete and closed. To qualify for a Chapter 13 discharge, you will need to complete a course in financial management. You also must prove to the court that you have not received a Chapter 13 discharge in the past two years.
Debt Discharge Process
The debt discharge process typically starts with you, the debtor, submitting a plan to repay your debts in exchange for forgiveness of some of your debts. The court will, in turn, provide you legal safeguards against foreclosure or repossession of your property. After submitting your Chapter 13 paperwork, you will need to prepare a plan to repay your debts.
The court will then look at your plan and decide whether or not your plan is fair and in accordance with the current laws. After about three to five years, the judge will discharge your case and your remaining qualifying debts.
Chapter 13 Hardship Discharge
Some debtors are not able to make their payments on time. In these cases, these debtors may qualify for a hardship discharge. To be eligible for a hardship discharge, you must show that it is impossible to modify the payment plan because you cannot make those scheduled payments.
Your situation must be beyond your control and that unsecured creditors have received as much as they would have had your case been filed under Chapter 7 laws. If you can meet these criteria, you may receive a discharge without completing your payments under the Chapter 13 repayment plan.
Chapter 13 After Chapter 7
If you have filed Chapter 7 bankruptcy to discharge your debt in the past, you have to wait at least eight years before you can file another Chapter 7. If you can’t wait those eight years, you can file for a Chapter 13 after four years.
Chapter 7 Bankruptcy
When you are looking to file for bankruptcy, you have the opportunity to file a Chapter 7 bankruptcy. Chapter 7 is also known as a “liquidation” bankruptcy because this bankruptcy allows for you to delete all debt that is legally ok to erase.
This approach takes your nonexempt property and sells it to pay your creditors. Your nonexempt property could include your personal belongings, jewelry, valuable collections, pension, and your car.
Chapter 7 Debts
Chapter 7 divides your debts into three categories: secured, unsecured, and priority. Secured debts are usually secured by an asset such as a car loan or a home loan. Chapter 7 laws protect you from your obligations or liabilities regarding your secured debt but keep in mind that your creditors can still take back your property.
Unsecured debts are medical bills, credit cards, or lawsuit judgments. You do not need to pay back your unsecured debts. Instead, these debts will be paid by the proceeds from your liquidation.
Priority debts are debts that are not eligible for discharge. These debts are usually paid first from the proceeds of the liquidation of your nonexempt assets.
Qualifying for Chapter 7
Bankruptcy laws determine if you are eligible to file for Chapter 7 bankruptcy. Your income must be equal to or fall below the median income in your state to qualify.
If your income is higher than the threshold, you may still be able to file. The court will require you to take a “means test” to establish your eligibility.
Effects of Chapter 13 Discharge
Although a great majority of your debts are discharged, a few are not eligible for discharge. Those debts include certain taxes and child support.
Other debts not included in the discharge:
- Student loans
- Alimony
- Criminal fines
- Restitution
- Debts with long-term obligations
- Fraud
If you incurred any debts resulting from a personal injury case caused by your negligence or driving under the influence, those debts are not dischargeable. If you obtained any property or money by false pretenses, those debts cannot not be discharged either.
Chapter 13 Discharge Assistance
The Chapter 13 discharge process seems pretty straightforward and is doable as long as you stay on track with your payments. Although you may be able to handle your Chapter 13 discharge independently, it is always best to reach out to a trusted advisor for help.
Facing creditors alone is not an easy feat, and it is always best to have a bankruptcy attorney on your side throughout the entire process. If you are getting ready to file for bankruptcy or filing for the discharge of your Chapter 13 bankruptcy, contact us now at 402-415-2525. The attorneys at Husker Law have the knowledge and expertise you need.
