The Chapter 13 Discharge
The chapter 13 debtor is entitled to a discharge upon successful
completion of all plan payments after filing bankruptcy. 11 U.S.C. § 1328(a). The discharge has the effect of releasing the debtor from all debts provided for by the plan or
disallowed (under section 502), with limited exceptions.
Those creditors who were provided
for in full or in part under the chapter 13 plan may no longer initiate or continue any
legal or other action against the debtor to collect the discharged obligations.
In return for the willingness of the chapter 13 debtor to undergo the
discipline of a repayment plan for three to five years, a broader discharge is available under chapter 13 than in a chapter 7 case.
As a general rule, the debtor is discharged from all debts provided for by the plan or disallowed, except certain long term obligations (such as a home mortgage), debts for alimony or child support, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor's conviction of a crime. 11 U.S.C. § 1328(a).
To the extent that these types of debts are not fully paid pursuant to the chapter 13 plan, the debtor will still be responsible for these debts after the bankruptcy case has concluded.
The Chapter 13 Hardship Discharge
After confirmation of a plan, there are limited circumstances under which the debtor
may request the court to grant a "hardship discharge" even though the debtor has
failed to complete plan payments. 11 U.S.C. § 1328(b).
Generally, such a
discharge is available only to a debtor whose failure to complete plan payments is due to
circumstances beyond the debtor's control and through no fault of the debtor, after
creditors have received at least as much as they would have received in a chapter 7
liquidation case and when modification of the plan is not possible.
Injury or illness that
precludes employment sufficient to fund even a modified plan may serve as the basis for a
hardship discharge. The hardship discharge is more limited than the discharge
described above and does not apply to any debts that are non dischargeable in a chapter 7
case. 11 U.S.C. § 523.
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