Chapter 13 bankruptcy allows debtors in Waco, Texas, to pay their debts gradually over time under a court-approved payment plan they devise themselves. If the court approves the plan, they commonly get three to five years to complete it, and then the remaining debts get discharged. However, not all debts can get discharged in bankruptcy.
How discharge works
The discharge at the end of a Chapter 13 case absolves debtors from paying certain debts. This means the creditors cannot seek further collections, such as litigation or sending letters.
The debtor must complete all the Chapter 13 requirements, which includes accurate listings of income and debts, attending the 341 meeting of creditors, undergoing debt counseling and making timely payments. The debtor should receive an Order of Discharge, but the case still won’t officially close until the trustee pays creditors. The court could revoke the discharge if it finds evidence of fraud.
Debts not discharged in Chapter 13 bankruptcy
A bankruptcy discharge only removes unsecured debts, such as credit card or medical bills that have no collateral. The U.S. Bankruptcy Code divides non-dischargeable debt into 19 categories, which includes:
- Alimony and child support
- Debts accrued from malicious conduct or impaired driving
- Current taxes
- Government fines
- Current utility bills
- Certain retirement loans
- Debts accrued within 90 days of filing and from luxury items
- Homeowners association fees
Student debt may get partially or fully discharged under certain circumstances if the debtor provides proof. To get certain tax debt discharged, the debtor needs to have an exemption and explain the reason they need relief. Under Chapter 13, the debtor can include tax debts in their repayment plan. The IRS commonly offers payment plans and may negotiate an amount lower than the debtor owes.
While filing for bankruptcy can provide relief, the debtor must do everything correctly to get discharged. Not everyone qualifies for Chapter 13, so a debtor should consult with an attorney to discuss their options.