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Understanding the limitations of the Chapter 13 discharge

In our last post, we spent some time exploring the additional -- and final -- conditions that an individual who has completed their three- to five-year repayment plan must satisfy in order to secure their long-awaited debt discharge under Chapter 13.

A natural corollary of this discussion is perhaps what types of debt are, or more significantly, aren't eligible for this discharge. In other words, what obligations are Chapter 13 filers expected to continue paying once the process is completed.

In general, the following types of debts are not discharged in Chapter 13 bankruptcy:

  • Alimony and child support
  • Certain tax debts
  • Certain types of continuing debt obligations, including home mortgage payments
  • Student loan debt
  • Restitution and fines ordered as part of a criminal conviction
  • Liability for personal injuries or death caused by driving a motor vehicle while under the influence of alcohol and/or drugs

Interestingly, the law also provides that certain types of debt are generally dischargeable under Chapter 13, but that this can change if the person or entity to whom the debt is owed (i.e., the creditor) challenges the prospective discharge and subsequently prevails after a hearing before the bankruptcy court.

These types of debt include:

  • Debts for fraud or embezzlement (defalcation) incurred while acting as a fiduciary
  • Debts for property or money secured via false pretenses
  • Liability for personal injuries or death caused by the willful or malicious actions of the debtor  

The purpose in sharing the foregoing information was certainly not to discourage, but rather to provide prospective filers with as much information as possible about the Chapter 13 process. Indeed, the reality is that many people can secure a much-needed fresh start via Chapter 13 or other debt relief options, and that a skilled legal professional can help guide the way.

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