Can debt be discharged in Chapter 13 bankruptcy?

When it comes to dealing with overwhelming debt, individuals often turn to bankruptcy as a viable solution. Chapter 13 bankruptcy provides a structured repayment plan to help debtors regain control of their finances.

It allows people to keep their assets while working towards repaying their debts over a specified period — typically three to five years. Here is how various types of debt are handled in Chapter 13.

Secured debt

Secured debt refers to loans tied to collateral, such as a house or a car. Chapter 13 bankruptcy allows debtors to propose a repayment plan that can modify the repayment terms for secured debts. While Chapter 13 bankruptcy does not discharge the debt outright, it provides an opportunity to catch up on missed payments and avoid foreclosure or repossession.

Under the proposed repayment plan, debtors can spread out missed payments over the plan’s duration, making it easier to manage their financial obligations. This feature is particularly beneficial for people who want to help protect their homes or vehicles from being seized by creditors.

Unsecured debt

Unsecured debt includes credit card debt, medical bills, personal loans and other debts not tied to collateral. Chapter 13 bankruptcy can discharge some unsecured debts, providing significant relief for debtors. The amount of unsecured debt that gets discharged depends on several factors, including the debtor’s income, expenses and the value of non-exempt assets.

During the repayment plan, debtors make regular payments to a trustee, who then distributes the funds to creditors. At the end of the plan, any remaining eligible unsecured debt may be discharged, relieving the debtor of further obligations.

What about priority debt?

Priority debts are a category of unsecured debts that receive special treatment in bankruptcy proceedings. These debts are considered more important than other unsecured debts and must be paid in full during the Chapter 13 repayment plan. Examples of priority debts include tax obligations, child support arrears and certain fines or penalties.

Chapter 13 bankruptcy helps provide a structured plan for debtors to catch up on priority debts while maintaining their other financial obligations. By incorporating these debts into the repayment plan, people can satisfy their priority obligations and avoid the severe consequences that may arise from non-payment.

Chapter 13 bankruptcy offers a valuable opportunity for individuals to regain control of their finances and manage overwhelming debt. By proposing a structured repayment plan, debtors can catch up on missed payments, reduce or modify secured debts and discharge a portion of unsecured debts.

Attorney Brad Hawley

Attorney Brad HawleyAttorney Brad Hawley possesses years of practical experience focused on bankruptcy, civil and criminal defense. He has prosecuted and defended clients in state court, and is a former enlisted member of the United States Army. Brad is driven by his desire to help people that have been hurt by the legal system, and is dedicated to fixing injustices he sees around him. [ Attorney Bio ]

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