Discharging Debt in Chapter 13 Bankrutpcy

There are two bankruptcy provisions for private citizens—Chapter 7 and Chapter 13. Of the two, a Chapter 13 is usually preferable if you qualify for it, because it lets you reorganize and work through debts over time without requiring liquidation (basically, sale) of your assets. Both chapters can get you out of a debt hole too deep to climb out of on your own, but Chapter 13 is often less disruptive to your life.

Chapter 13 Debt Requirements

Chapter 13 is not usable by everyone. To start with, there’s a limit on how much you can owe. The Chapter 13 bankruptcy debt limit is $336,900 of unsecured debt (like credit cards) and secured debts (such as many car or small business loans) of less than $1,010,650. (These limits are periodically adjusted.)

Another requirement is that prior to filing, the debtor must have received approved Chapter 13 credit counseling. Since the idea in Chapter 13 is to reorganize and manage your debt, not to do a fire sale of assets to pay as much as you can, you need to show that you’ve received guidance and support on how to handle your debt.

Discharging Chapter 13 Bankruptcy Debt

Chapter 13 will let you clear, or discharge, most debts by paying them through an approved plan—but not all, known as ch 13 dischargeable debt. There are some debts that, as a matter of public policy or public good, a debtor is not allowed to discharge.

Chapter 13 nondischargeable debts include:

• home mortgages;
• alimony and child support;
• most debt owed to the government, such as many taxes, government-guaranteed student loans, or repayment of many government benefits you were accidentally overpaid;
• debts for injuries caused while DUI; and fines or restitution owed from criminal acts.

However, other than that, Chapter 13 will clear your debts and give you a chance to start over.

Chapter 13 Bankruptcy Debt Legal Help

Bankruptcy is very complex—that’s why, for example, there are separate bankruptcy courts. Deciding which type of bankruptcy is most appropriate, ensuring that all requirements are complied with, and dealing with any challenges from creditors is not something a lay person should try to do for him- or herself. The stakes are high: get bankruptcy wrong, and you’re still liable for all your debts.