For those suffering from severe debt, who are considering bankruptcy or who are already in the Chapter 13 repayment process, you are probably curious as to how the Chapter 13 bankruptcy process is completed. A Chapter 13 bankruptcy can end in one of two ways, a dismissal or a discharge. One is the realization of your debt relief goal, and the other, something to be avoided at all cost.
Requirements for Chapter 13 Discharge
Upon successful completion of the Chapter 13 process, a debtor is entitled to a discharge, assuming that they have met all domestic support obligations, haven’t received a previous Chapter 13 discharge in the last two years prior or previous Chapter 7 discharge in the past four years, and who have successfully completed the financial and management courses required.
Assuming that the court doesn’t find any reasons to believe a limitation on a debtor’s homestead exemption has been brought to light, the court will send a debtor their discharge letter. A discharge grants you the release of legal debts that are included in your initial bankruptcy plan and that aren’t disallowed (such as secured debts and priority debts).
Hardship Discharge in Chapter 13
The aforementioned requirements must be met in order for a debtor to receive a Chapter 13 discharge, but there is an exception. Because the US Bankruptcy Code makes room for unexpected circumstances that may arise during the course of a Chapter 13 bankruptcy, the bankruptcy court has the ability to grant what is known as a “hardship discharge” in situations where a debtor can still obtain a Chapter13 discharge without having met all the previously mentioned criteria. In order to obtain a hardship discharge, three provisions must be met. First, a debtor must show that they failed to complete the Chapter 13 repayment plan due to circumstance outside of their control such as severe illness or injury. Additionally, the creditors listed in the bankruptcy petition must receive at least the same amount of money as they would have in a Chapter 7 bankruptcy case. Lastly, a modification of the current plan must not be possible.
Chapter 13 Discharge in Texas
Chapter 13 bankruptcy, sometimes referred to as the “wage earners” bankruptcy is the second most popular form of debt relief in Texas, second in the number of filings only to Chapter 7 bankruptcy. For debtors, the overall goal of Chapter 13 bankruptcy is the discharge or the successful completion of the Chapter 13 repayment plan. Once you have successfully reached the end of the three to five years of paying back on debts, the remainder of non-priority, unsecured debt is discharged or wiped out. Depending on how your specific Bankruptcy court handles discharges, you may be required to attend a court appearance called a “discharge hearing”. However, some courts choose to simply mail you a formal notice of your discharge.
For those with debt that can’t be renegotiated directly with creditors or that would take more than 60 months to pay off, you owe it to yourself to explore Chapter 13 bankruptcy as a form of debt relief. Chapter 13 bankruptcy can both get your finances back on track while eliminating unsecured debt in the process. Contact your local Texas bankruptcy attorney to begin your journey towards a debt-free future.