Obtaining a discharge in a Chapter 13 bankruptcy will not eliminate all debts. Here are some of the debts that remain after bankruptcy.
Exceptions to a Chapter 13 discharge include, generally:
More on these exceptions to the Chapter 13 discharge follows below. For additional information, see Exempt Property in a Chapter 13 Bankruptcy; The Chapter 13 Debt Discharge; and What are a Debtor's Obligations Under Chapter 13?
Domestic support obligations are simply debts incurred before or after bankruptcy that fulfill the following requirements:
The effect of a discharge on child and spousal support obligations varies somewhat depending on whether you filed a Chapter 7 or a Chapter 13 bankruptcy.
Whereas a Chapter 7 filing will have little effect on such obligations, a Chapter 13 proceeding may stop collection activities for these debts, at least temporarily.
The difference between chapters arises because, although all bankruptcies stop or "stay" creditors' efforts to collect debts, the Bankruptcy Code excludes actions to collect child support or spousal maintenance from the stay unless the creditor attempts to collect from the "property of the estate." The different chapters of the Bankruptcy Code define "property of the estate" differently.
Under Chapter 13, the Bankruptcy Code considers the debtor's earnings as property of the estate, since the repayment plan is based on making payments from the debtor's current income rather than from liquidated assets.
As a result, support collections may be stayed in Chapter 13. The court can decide to remove the stay to allow for withholding alimony and child support from the debtor's income. Whether it does so may depend on how well the wage-earner plan provides for child and spousal support. If the court believes the plan does not include adequate provisions, it may decide to lift the stay.
The 2005 revision to the Bankruptcy Code made the collection of domestic support obligations a much higher priority. Domestic support obligations are now specifically excepted from discharge.
A Chapter 13 case may be dismissed if the debtor fails to pay any domestic support obligation that becomes payable after the filing of the petition. Domestic support obligations that are assigned to a governmental unit may be paid less than 100% but only if disposable income is dedicated to the plan for a full five years.
The gist of the change is that a Chapter 13 debtor must certify the payment in full of domestic support obligations or that the confirmed plan provides for payment of pre-bankruptcy domestic support obligations. Also, the priority of domestic support obligations was moved to the top of the list of priorities, and the preference provisions were amended to protect domestic support transfers from avoidance.
No. A debtor must continue to pay alimony even after Chapter 13 discharge. The same holds true for child support obligations. In other words, even at the conclusion of the bankruptcy proceeding, these on-going obligations remain.
As noted above, educational loans guaranteed by the United States government are also generally not discharged by a Chapter 13 bankruptcy.
They may be dischargeable, however, if the court finds that paying off the loan will impose an undue hardship on the debtor and his or her dependents. In order to qualify for a hardship discharge, the debtor must demonstrate that:
The debtor must apply for the hardship discharge before the discharge of the debtor's other debts is granted. Application for a hardship discharge is not included in the standard bankruptcy fees, and must be paid for after the case is filed.
The Bankruptcy Code does not specifically define the requirements for granting a hardship discharge of a student loan. Courts have applied different standards, but they often use a three-part test to determine eligibility:
Handling debt involves many important and delicate decisions. If you understand your rights, you can get out from under your debt burden while still preserving some important assets. Contact a local bankruptcy attorney, who can best help plan your return to solvency.
