The Chapter 13 Bankruptcy Discharge
When you have successfully completed your chapter 13 plan, you receive what is referred to as a discharge. When you receive a discharge, it means that all of the debt you included in your chapter 13 filing has been legally paid. After the discharge, creditors who were part of the process are not allowed to come after you to collect any additional payments.
In order to receive a discharge, you must meet certain requirements. If you are required to pay child support or spousal support, you must tell the court that you have kept up-to-date on all of your support payment. This is referred to as “certifying” to the court. If you missed any child or spousal support paymentsbefore you filed for bankruptcy, you must certify that you paid any past due amounts that were built into the payment plan.
You also must show the court that you have completed a financial management course offered by an agency approved by the court. As your attorneys we will provide you with a list of approved agencies. The course must be taken before your last payment is made under the plan or you file for a hardship discharge. You can choose to take the course earlier in your chapter 13 plan, as this may help you in your managing your finances during your payment period.
When you have satisfied all of the requirements of chapter 13, the discharge is final. There are only a few circumstances under which the court can revoke a discharge. In a chapter 13 bankruptcy, the discharge can only be revoked by the court if you were deliberately deceitful. That is, you committed fraud.
If someone claims to the court that you committed fraud, they are required to show that they discovered your fraud after the discharge was granted by the court. The reason the bankruptcy laws require that the person must prove they did not find out about the fraud before the discharge is to force individuals to object prior to the discharge being granted. The person who discovers the fraud must formally object to your discharge. That individual has one year from the date your discharge was granted to bring the issue to the court.
Reaffirming Debt in Chapter 13 Bankruptcy
Sometimes individuals will want to negotiate with a lender to reaffirm a debt. Reaffirming a debt with the lender means that after the bankruptcy you will still be legally responsible for paying back that debt. If you choose to do this without being represented by a lawyer, the court is required to hold a discharge hearing. The court can make a decision to discharge that debt, even if you want to reaffirm the debt. This happens when the documentation you submit for reaffirming the debt raises concerns that there are problems with the reaffirmation.
The reaffirmation of a debt cannot cause undue hardship for you or your family. Some creditors will push you to reaffirm your debt with them. Because there is concern about banks and creditors coercing individuals in bankruptcy to reaffirm their debts, the bankruptcy laws require that you get an in-depth explanation either at the hearing or from your attorney before the court will approve the request to reaffirm the debt. This is why the discharge hearing is required when you choose to reaffirm any debts.
If your debt is secured by property, the court must approve the reaffirmation of the debt in order for it to be valid. If you are represented by an attorney in negotiating the reaffirmation, your attorney will file a written document with the court stating the agreement you made with the creditor was not coerced and you were fully informed. Even in these cases, the reaffirmation must still be approved by court.
There have been cases where an individual wants to reaffirm a debt and there is not enough money in the person’s budget to make the payments. Even if you negotiated the reaffirmation with an attorney representing you, the court assumes that this will cause undue hardship to you and your family. The bottom line for the court approving your reaffirmation is that it must not cause undue hardship and it is in the best interests of you, the debtor.
What Debts Are Not Discharged in Chapter 13 Bankruptcy?
Under chapter 13 bankruptcy, you are able to discharge more debts than you would under chapter 7. But, there are still debts that are not discharged at the end of your payment period. One of the most common debts that isnot discharged is a long-term loan such as a home mortgage. One characteristic of a long-term debt is that your final payment for the loan is due after you completed the plan.
Certain tax debts are not discharged in your chapter 13 bankruptcy. If you incurred debts under false pretenses, these debts will not be discharged. If you failed to list any debts when you filed for bankruptcy, and the creditor did not know this, you may have still be legally responsible for that debt. Child support and spousal support payments are not discharged in a chapter 13 bankruptcy. The other requirement with child or spousal support before you receive the discharge is you must certify to the court that you are current on all support payments.
Most student loan debts are also not dischargeable under chapter 13bankruptcy. If you owe money because of a DUI, or owe restitution or need to pay fines because of a criminal sentence, these cannot be discharged. If you must pay restitution or damages from a civil lawsuit involving willful or malicious injury or death, these debts will not be discharged in chapter 13 bankruptcy.
Once you receive the discharge from the court, a notice is sent to the trustee and all of your creditors. You will receive a copy of this notice of this as well. Notice of your discharge completes activity in your case although it may not be officially closed until a later date.
The chapter 13 bankruptcy process is one that will last three to five years. You might be tempted to represent yourself in the bankruptcy process in order to avoid attorney’s fees. Because your circumstances can change over that time period, having legal representation could be important to be able to ensure you make the best decisions throughout your payment plan period. Before you make the decision to represent yourself, we encourage you to set up a free consultation with one of our experienced bankruptcy attorneys in Tucson or Phoenix. Call our office today to set up your appointment and learn first-hand what we can do to support your throughout your bankruptcy.