Law Office of Jason A. Nordsell
Law Office of Jason A. Nordsell

Chapter 13: discharge of debt after successful completion of a court-approved payment plan.

The following applies to individuals, not businesses:

 

After successful completion of a court-approved payment plan, a Chapter 13 Bankruptcy allows a debtor to discharge all of their dischargeable debts, and provides for the partial repayment of others (note that some debts, like child support, cannot be discharged).  Chapter 13 is a form of debt consolidation, where your disposable income - determined by the court through "means testing" - is distributed to your creditors on a 3 to 5-year payment plan.  All debts and liens not paid in the repayment plan are discharged upon the successful completion of the plan (subject to exceptions, like a mortgage lien, child support and spousal support debts, etc.).  Some debts must be repaid in full, like alimony and child support; some debts you will likely want to repay in full, such as debts secured by liens (house, car, etc.) although you may be able to avoid paying parts of a secured claim on non-mortgage loan (called a "cramdown"); and unsecured debts will be repaid, if at all, based on how much disposable income you have available to repay them.

 

"Means testing" is used to prevent individuals with high incomes from avoiding paying their debts through bankruptcy.  For example, a debtor is not subject to the means test at all if their income is below the state's median income.  If it is above, then a calculation is done that factors the debtor's income and debts.  A sufficient disposable income to make at least some repayment plan means that a debtor can use only Chapter 13, not Chapter 7.

 

There are advantages to a Chapter 13 over a Chapter 7 bankruptcy.  For example, some debts that are not dischargeable in Chapter 7 are in a Chapter 13, such as tortious damage claims, untimely filed tax claims, marital settlement debts, and others.  You don't have to surrender your non-exempt property in a Chapter 13 bankruptcy, as opposed to a Chapter 7.  A Chapter 13 bankruptcy can also stop a foreclosure (but only while the case is pending).

 

Contact Us to discuss your situation and find out what your options are.  It is free, there is no obligation, and we can speak over the phone.

 

Timeline of a typical Chapter 13 Bankruptcy, from filing to discharge

Most cases take 3 to 5 years to complete after filing.  The timeline below assumes all information and documents submitted to the court and trustee are accurate and complete, and no objections are made by the trustee or your creditors.

  • Day 1: Filing with the court.  All information and documents have been gathered, all court-required courses are complete, and you have paid all fees and costs.
  • Day 1 - 20: After filing, you must complete an additional court-required course on debt management.
  • Day 14: Your first payment to the Trustee is made.
  • Day 20 - 45: Confirmation of Chapter 13 Plan at Federal Courthouse.  We will prepare you for this hearing.
  • Day 20 - 50: Meeting with Trustee - mandatory attendance, and will cover the information and documents you submitted to the court.  We will prepare you for this meeting.
  • Monthly payments are made to the Trustee for the next 3 to 5 years, depending on your plan.  Upon completion of your plan, a discharge order is sent to you, and we notify all 3 credit bureaus.  You will need to schedule an appointment with us if you need a lien release, a car title returned, etc.

Read More:

 

Chapter 7 - Total discharge 

 

Alternatives to Bankruptcy

 

Fees

 

Main Bankruptcy Page

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Principal office located in Addison, Texas

 

If you have questions or want to schedule a consultation, please fill out the contact form.  Your email will be sent directly to an attorney and responded to within one business day.

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