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  • How to Discharge Debts in Chapter 13 Bankruptcy?

    Under Chapter 13 bankruptcy, you can propose a repayment plan over three to five years and, if your plan is fulfilled according to its terms, receive a discharge from debts owed. Creditors cannot object to Chapter 13 discharge unless litigation is involved; however, certain debts, such as domestic support obligations, claims for willful and malicious injury, and specific tax claims, cannot be forgiven under Chapter 13. That is why you should understand how to discharge debts in Chapter 13 bankruptcy.

    Secured Debts in Chapter 13 Bankruptcy

    Unsecured debts, or non-collateralized loans, are not tied to collateral such as your house or car. This unprotected most consumer debts, such as credit card balances and personal loans, against bankruptcy proceedings. Under Chapter 13 bankruptcy proceedings, courts may discharge nonpriority unsecured debts upon successful completion of your repayment plan, typically after three to five years.

    Although secured debts such as your mortgage or car loan cannot be eliminated through Chapter 13 bankruptcy, significant reductions can still occur. Your creditors should stop harassing you and agree to accept lower monthly payments during your repayment plan so you can keep your property while also freeing yourself of debts.

    Discharge in Bankruptcy

    Priority Debts Arising

    Priority debts must be paid in full, while payments on assets like your house or car should remain current. If, due to low-income levels, it would be unfair for you to be required to pay all unsecured debts off in full, the court can grant what’s known as a debt relief discharge – granted when they determine that they were accrued due to circumstances for which you should not be held liable (like an unexpected medical condition or divorce proceedings).

    When filing for business bankruptcy, your case will be overseen by a trustee who reviews debts and income statements before recommending them to a judge for approval. If approved by the judge, a repayment plan will be devised with assistance from a debt counselor; once approved by court hearing schedulers, it should result in the discharge of unsecured debt after the completion of the repayment period.

    Secured Debts

    Chapter 13 bankruptcy allows you to restructure and extend repayment terms on secured debts like a mortgage or auto loan, lowering monthly payments while making them easier to keep up with. In some instances, additional money could help reduce the overall loan amount by contributing extra towards repayment plans.

    Chapter 13 bankruptcy provides you with an effective means to discharge debts caused by breaches of contract or negligence; however, debts caused due to intentional or malicious harm against another individual or entity cannot be discharged under this chapter.

    Debts Discharged at the End of Chapter 13 Bankruptcy

    Debts That Can’t Be Discharged in Bankruptcy

    Although bankruptcy offers individuals a fresh start, it cannot eliminate all debt. Certain obligations remain, including most taxes (except income tax), alimony or child support payments, property settlement awards from divorce decrees, penalties, forfeitures, and criminal restitution obligations.

    Domestic Support Obligations

    Many divorced individuals rely on court-ordered payments from their former partner to meet essential financial management, known as domestic support obligations, which cannot be discharged in bankruptcy.

    This may include debts for alimony, child support, and any other support agreed to or ordered by the courts during divorce proceedings or separation agreements.

    Other court payments that do not qualify as domestic support obligations, such as property settlement awards and debts from equitable distribution agreements, also qualify as domestic support obligations.

    You Have to Pay Nondischargeable Tax Obligations

    Every year, hundreds of thousands of people fall into debt with the IRS for various reasons – an oversight or financial difficulties they cannot avoid – leaving them facing overwhelming tax debt that feels insurmountable.
    Tax debts are considered a priority in bankruptcy proceedings, meaning they will not be discharged upon filing. To be discharged, these taxes must meet several criteria. They must be income-based; due (with extensions) within three years before you filed bankruptcy petition; assessed within 240 days from this filing date;

    Student Loans

    For decades, student loan borrowers seeking to discharge their student loans have struggled to satisfy a complex and often misunderstood statutory standard that requires them to demonstrate that repaying their debt would impose undue hardship. Unlike consumer debts such as credit card debts, this standard is determined by current law and subject to rigorous court interpretation.

    Department of Justice (DOJ) and Education Department (ED) guidance should make bankruptcy debtors much more successful in seeking discharges of student loan debts. The new guidelines establish clearer expectations for discharging debt, lessen burdens for borrowers by streamlining and simplifying processes, and increase the number of cases in which ED agrees to support discharge requests.

    The Chapter 13 Debt Discharge

    Debts for Personal Injury

    As is evident with bankruptcy, its advantages can quickly erase debts and provide a fresh financial start. However, bankruptcy also comes with significant downsides; federal laws stipulate which debts can and cannot be discharged in bankruptcy, with personal injury debts likely falling under these guidelines and potentially complicating an already difficult bankruptcy case further.

    Personal injury debts from drunk driving accidents fall within the scope of nondischargeable debts that include most taxes and government-backed student loans; thus, injured plaintiffs may need to fight to discharge them through bankruptcy.

    Unsecured creditors cannot pursue collection efforts on debts discharged after bankruptcy cases have closed, and anyone breaking this law may face sanctions by the bankruptcy court; typically, this would involve filing a motion with them asking them to revoke the debtor’s discharge? a powerful tool against unfair treatment of injured plaintiffs.

    Criminal Fines and Restitution Debts

    Fines and fees associated with criminal activity can quickly mount with interest, collection costs, payment plan penalties, and other charges. Restitution payments that defendants owe victims must also be prioritized over other debts and typically go directly to them.

    To make these payments, criminal justice debt holders must have access to income sources or sell assets such as cars or homes. Something made hard for ex-incarcerated individuals looking to reenter society using unfair retribution in unpaid fines and penalties resulting from over-policing communities of color that results from unfair retribution in terms of unpaid fines and penalties owed.

    Congress attempted to address this problem with legislation that exempted debts for “restitution or criminal fines included as part of a sentence for conviction of crime from bankruptcy discharge.” Courts, however, are divided on whether this definition is broad enough, and frequently, exceptions include debts owed to bail bondsmen where state exemption laws protect assets from seizure by creditors.

    The Chapter 13 Discharge Process


    Chapter 13 bankruptcy involves understanding the distinctions between secured, unsecured, and priority debts, as well as recognizing which obligations can and cannot be discharged. It is advisable for individuals to seek professional legal guidance to navigate the process effectively and ensure compliance with all legal requirements.

    Buried in Debt? Contact The Pope Firm Now!

    The Pope Firm offers comprehensive bankruptcy solutions tailored to your needs, including Chapter 7, Chapter 11, and Chapter 13 bankruptcy services. Whether you’re looking to declare bankruptcy in Tennessee or determine if you qualify, our team will guide you every step of the way. Don’t let financial stress control your life. Contact The Pope Firm today.

    If you need assistance with personal or business bankruptcy and filing in Tennessee, reach out to The Pope Firm and Charles Pope, Attorney At Law.

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    Frequently Asked Questions

    Bankruptcy occurs when an individual, business, or other entity declares the inability to repay its debts. If you file for bankruptcy, that means that debt collectors must pause attempting to collect debts from you. Bankruptcy often allows you to erase most, if not all, of your debts.

    There are two types of debts, unsecured and secured. Some examples of unsecured debts are credit card bills, medical bills, or taxes. Secured debts can include car loans or mortgages, which use the purchased item as collateral. In many cases, filing for bankruptcy can keep this collateral protected and prevent foreclosure of your home or repossession of other assets.

    Bankruptcy is governed by federal legislation under the Bankruptcy Code, which falls under the greater United States Code. Both federal law and local law inform the bankruptcy procedure. Federal bankruptcy judges, appointed by the United States court of appeals, preside over court proceedings in these cases. In court, the judge and a court trustee, review your finances to determine whether or not to discharge the debts at hand.

    Each state has one or more bankruptcy courts. Tennessee has six bankruptcy courts throughout the state.

    Filing for bankruptcy can be a daunting process, and working with a firm with expertise in the field can provide you with necessary guidance.

    There are several types of bankruptcy. Most individuals, married couples, and small businesses choose to file under Chapter 7 or Chapter 13.

    What are the Differences Between Chapter 7 and Chapter 13?

    The primary difference between these two types is that Chapter 7 bankruptcy allows an entity to fully discharge its debts in a short period. A Chapter 13 bankruptcy involves reorganizing debts and creating a plan to repay those debts over an allotted time. After that time, Chapter 13 eliminates most of the remaining debts.

    Chapter 7 bankruptcy is typically filed by those with very limited income and unsecured debts, the most common of which is medical bills. Chapter 13 bankruptcy is most often filed by higher income bracket individuals and those with more assets, such as a car or a home. The motivation for filing Chapter 13 bankruptcy is often preventing assets from being repossessed or home foreclosure due to outstanding debts.

    What Other Types of Bankruptcy Are There?

    Two other types of bankruptcy are Chapter 11 and Chapter 12.

    Chapter 11 primarily applies to larger companies and corporations, but sometimes it is the right choice for small businesses as well. Chapter 12 applies to those who are considered family farmers.

    Various considerations get factored into who should file bankruptcy. Filing bankruptcy may be the right choice for you if you are overwhelmed by debt. Regardless of what type of bankruptcy you file, as soon as the process begins, you are granted an automatic stay. A stay is an injunction that prevents creditors from collecting any debts for an allotted time. An automatic stay halts the process of, for example, foreclosing on a home or repossessing a vehicle.

    A Chapter 7 bankruptcy will discharge most of your debts. Filing Chapter 7 is appropriate for those who make less than the median household income in Tennessee and whose assets would not be at risk. In this situation, your non-exempt property is sold to pay off creditors.

    Chapter 13 bankruptcy allows you to create a plan to repay your debts. If you have non-exempt property used as collateral in secured loans, you can restructure your finances to pay off any relevant debts over the next three to five years. Chapter 11 functions in a similar way, but is exclusively for businesses.

    Filing for bankruptcy can provide a fresh start for those bogged down with debt, either by restructuring finances or discharging debts entirely.

    How bankruptcy affects business depends upon the type of bankruptcy filed.

    Chapter 11

    Businesses classified as corporations, partnerships, or LLCs can file Chapter 11 bankruptcy. Chapter 11 allows for debt restructuring, while the business stays open. As in Chapter 7 and Chapter 13, an automatic stay activates as soon as your bankruptcy period begins. In an automatic stay, creditors cannot try to collect money or other assets from you.

    During this period, you work with your lawyer to restructure your debts and develop a plan to get your business back on track. This plan must be approved by some of your creditors and a bankruptcy court to go forward. You will be able to repay your debts over several years.

    Chapter 7

    Filing Chapter 7 bankruptcy discharges all of your business’s debts by liquidating your assets. The entire process can be completed quickly, often in several months. Chapter 7 allows for the discharge of most debts, excluding government taxes and fines.

    Chapter 13

    Only individuals can file for Chapter 13 bankruptcy. Thus, although businesses cannot file, you can file Chapter 13 as the sole proprietor of your business.

    When you decide to begin the bankruptcy process, the first step is to find a lawyer who is an expert in filing bankruptcy in Tennessee. Hiring a bankruptcy lawyer can indeed be expensive, but it is worth the cost. This professional can guide you through what type of bankruptcy is best for your situation and what to expect throughout the process.

    • Collect your documents: It is important to have everything from your paystubs to your credit report available before starting.
    • Take the means test. This test will determine if you are eligible for Chapter 7 bankruptcy and help guide you in making a repayment plan for Chapter 13 bankruptcy.
    • Meet with a credit counselor. In the state of Tennessee, most individuals must meet with a credit counselor from an approved provider before filing for bankruptcy.
    • Fill out bankruptcy forms. If working with a lawyer, you can expect they will use online programs to help you file your paperwork.
    • Pay your filing fee. It costs $335 to file for bankruptcy in Tennessee. Waiver of the fee is possible in some cases, but it is uncommon. However, it is possible to pay the fee in several installments instead of the entire balance upfront.

    Declaring bankruptcy wipes out many debts, but not all.

    What Debts are Usually Covered by Bankruptcy?

    Bankruptcy can clear most unsecured debts, including:

    • Credit card bills
    • Medical bills
    • Overdue utility payments

    Bankruptcy can also clear many secured debts, but it depends on whether you file for Chapter 7 or Chapter 13 bankruptcy. For Chapter 7, you will have to give up any non-exempt items you put up for collateral. For Chapter 13, they will become part of your repayment plan.

    What Debts Are Not Covered by Bankruptcy?

    • Child support
    • Alimony obligations
    • Those related to personal injury or death in a drunk driving case
    • Any debts not listed on your bankruptcy papers

    No type of bankruptcy covers these debts. If you file for Chapter 7, they remain outstanding. Under Chapter 13, you pay these debts along with your other debts.

    What Debts May Be Covered?

    Bankruptcy rarely covers student loan debt. However, it may be in some cases with proof of undue hardship.

    Tax debt is also rarely covered, but bankruptcy may cover certain old unpaid taxes.