How Does Chapter 13 Bankruptcy Result in a Debt Discharge?

When you are thinking about the possibility of filing for consumer bankruptcy, you may be considering Chapter 13 bankruptcy, particularly if you have a steady job or if you are hoping to stop a foreclosure on your home and to remain in that property. Chapter 13 bankruptcy is beneficial for so many Americans because it allows debtors to restructure their debts over a period of three to five years while taking advantage of the automatic stay, which can stop a foreclosure. Although the automatic stay does not mean that a debtor can remain in a home that is nearing foreclosure, in Chapter 13 bankruptcy in particular, it stops foreclosure proceedings from moving forward, and then the debtor can get back on track with mortgage payments through the Chapter 13 repayment plan. There are also many other benefits to Chapter 13 bankruptcy that an Oak Park bankruptcy attorney can discuss with you.

In the meantime, we know that it can be difficult to understand how a Chapter 13 bankruptcy discharge works since this is not a liquidation bankruptcy that results in a quick discharge.

Debt Discharge is Different From Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy case, which is a type of liquidation bankruptcy, you may know that the debtor receives a discharge as soon as the case is completed—typically within a few months. However, in order for a debtor to receive a discharge of eligible debts through a Chapter 7 bankruptcy case, all non-exempt property must be liquidated. The process of receiving a discharge in a Chapter 13 case is much different.

To be clear, under the U.S. Bankruptcy Code, in a Chapter 13 bankruptcy case, non-exempt assets are not liquidated in order to repay creditors. Instead, non-exempt property is used to determine the total amount that the debtor must repay over the course of the Chapter 13 repayment plan. Then, once the terms of the repayment plan have been completed, any remaining debt that is dischargeable can be discharged. Debts that are not dischargeable, generally speaking, including but are not limited to: government fines, debt owed as a result of DUI damages in a personal injury case, child support or alimony debt, and certain tax debt. If you are unsure about whether your debt is dischargeable through bankruptcy, you should seek advice from a bankruptcy lawyer who can help.

Timeline for a Chapter 13 Discharge

As we noted above, debt discharge in a Chapter 13 bankruptcy case does not happen shortly after you file. Rather, in order to have remaining debt discharged, you must complete the terms of your court-approved repayment plan. After this time—which is typically anywhere from three to five years—any debt that remains and is dischargeable can be discharged by the bankruptcy court.

If you do not complete the terms of the repayment plan, you will not be able to have your debt discharged unless you convert your case to Chapter 7. If this seems like it may be the only option for you because you are having difficulty making payments on your Chapter 13 plan, you should seek advice from a lawyer.

Contact an Oak Park Bankruptcy Lawyer

Do you have questions about filing for Chapter 13 bankruptcy? Our Oak Park bankruptcy attorneys can help. Contact the Emerson Law Firm for more information.



See Related Blog Posts:

Top Reasons for Hiring a Consumer Bankruptcy Lawyer

Will I Have to Give Up My Smartphone and Laptop if I File for Bankruptcy?

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