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When is a debtor entitled to a Chapter 13 debt discharge?

In a Chapter 13 bankruptcy, a debt discharge is allowed if the debtor meet three requirements. These requirements are that the debtor:

— Has paid all domestic support obligations;

— Has not received a discharge in a previous bankruptcy case filed within two years for a previous Chapter 13 case and four years for previous Chapter 1, 11 and 12 cases; and

— Has completed an approved financial management course.

The bankruptcy court, though, won’t enter the debt discharge until after a hearing in which it determines that there isn’t any reason to believe that a limitation on the debtor’s homestead exemption exists.

What happens when the debt discharge is provided?

Creditors that were paid off in full or partially as part of the debtor’s Chapter 13 plan cannot attempt to collect the discharged debts. In most cases, the debtor is released from debt obligations that were paid by the plan. There are certain debts that cannot be discharged, including home mortgage, child support, alimony, student loans, certain taxes, restitution order by court as part of a criminal sentence and more.

Debts that were obtained by false pretenses, such as debts for fraud or damages in a civil case that arose from the debtor’s willful or malicious actions.

What is a Chapter 13 hardship discharge?

If the debtor is not able to complete the repayment plan, then he or she can ask the court for a “hardship discharge.” This is only available if:

— The debtor couldn’t control the circumstances that led to his or her failure to complete the payment plan.

— Creditors received as much from the debtor as they would have received in a Chapter 7 bankruptcy.

— Modifying the plan is not possible.

While bankruptcy can seem complex and even frightening, an attorney can provide more information as to what options you have when it comes to discharging debt.

Source: FindLaw, “The Chapter 13 Debt Discharge,” accessed Nov. 04, 2016

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