Find out which debts get discharged at the end of your Chapter 13 repayment period.
Updated by Cara O'Neill, Attorney · University of the Pacific McGeorge School of Law
Updated by Carron Nicks, Attorney (Tulane University School of Law)
When you complete your Chapter 13 repayment plan, you'll receive a discharge order that will wipe out the remaining balance of qualifying debt. In fact, a Chapter 13 bankruptcy discharge is even broader than a Chapter 7 discharge because it wipes out certain debts in Chapter 7 bankruptcy.
Read on to learn more about which debts get discharged at the end of Chapter 13 bankruptcy.
Not sure which chapter to file? Start by reading What Are the Differences Between Chapter 7 and Chapter 13 Bankruptcy?
You'll find a complete overview of the bankruptcy process in What You Need to Know to File for Bankruptcy in 2022.
Which Debts Get Paid in Chapter 13?
Not all debts are treated equally in bankruptcy. Each debt falls into a particular category, which tells you whether the debt must be paid or whether it can be discharged.
A Chapter 13 repayment plan will lay out separate instructions for paying each of these three types of debt. Here are a few of the significant details:
- Secured debts. The first step in categorizing debts for a Chapter 13 plan is to determine whether collateral secures the obligation (house or car debts are usually secured). When the debt is secured, you must pay as agreed or surrender the collateral . Long-term debts, like a 30-year mortgage, don't need to be paid in full through the Chapter 13 plan. However, if you're behind on payments, you'll need to make them up in the plan. If you surrender the collateral, the debt becomes an unsecured debt.
- Unsecured debts. Unsecured debts are not guaranteed by collateral. They're treated in a Chapter 13 plan according to their importance or their priority.
- Priority unsecured debts. These debts don't get discharged in a Chapter 13 or a Chapter 7 bankruptcy case. In a Chapter 13 plan, you must fully pay priority claims. Priority claims include, among others, recent income taxes, past due alimony, and child support.
- Nonpriority unsecured debts. The majority of debts discharged in Chapter 13 bankruptcy are nonpriority unsecured debts. Credit card balances, personal loans, medical bills, and utility payments fit here. Often, the Chapter 13 plan will not provide for enough money to pay all nonpriority debts in full. If the plan meets the requirements laid out in the bankruptcy code, the remaining balances will be discharged (they'll go away) when the debtor completes the plan.
Once you've completed your Chapter 13 repayment plan, most remaining nonpriority unsecured debt balances will get discharged. Student loan balances are a notable exception—you'll remain responsible for those (at least for the present).
Debts Qualifying for a Chapter 13 Discharge
Below are some of the most common types of nonpriority unsecured debts. Typically, any balances on these accounts will be discharged at the end of the Chapter 13 plan.
- Credit card debt. Most bankruptcy filers have some amount of credit card debt they would like to get rid of. Because credit card debt is considered nonpriority unsecured debt, any outstanding balance remaining after you complete your repayment plan will be discharged.
- Medical bills. If you went into debt because your medical care was not fully covered by insurance, you can discharge your medical bills through Chapter 13 bankruptcy.
- Personal loans not secured by collateral. Similar to credit card debt, any uncollateralized personal loans (such as a payday loan) also get discharged at the end of your Chapter 13.
- Older tax obligations. Most tax obligations are nondischargeable priority debts. However, certain taxes (such as older income tax balances) might be considered nonpriority debts and get discharged upon completion of your case if you didn't commit fraud (and, in some jurisdictions, timely filed your returns). (To learn more, see Tax Debts in Chapter 13.)
- Breach of contract or negligence-related debt. If you have a judgment against you because you breached a contract (failed to pay or perform as required) or committed a negligent (accidental) act that caused personal or property harm, you can usually discharge it through Chapter 13 bankruptcy. However, be aware that Chapter 13 won't discharge a debt for willful or malicious injury to a person.
Debts Discharged in Chapter 13 But Not Chapter 7 Bankruptcy
Some debtors who would otherwise be qualified to file a Chapter 7 case, choose to file a Chapter 13 to take advantage of Chapter 13's expanded discharge list. Below are some of the debts that will get discharged in Chapter 13 but not in Chapter 7 bankruptcy.
Willful and Malicious Property Damage
Through Chapter 13 bankruptcy you can discharge debts arising out of your willful and malicious damage to another person's property (the damage was intentional, not accidental) but not willful injury to another person.
Debts Incurred to Pay Nondischargeable Taxes
If you pay your tax obligation using a credit card, that debt is normally considered nondischargeable in a Chapter 7 bankruptcy. However, in Chapter 13 you can discharge debts you incurred to pay nondischargeable tax obligations.
Certain Debts Arising Out of Divorce or Separation Property Settlement
Domestic support obligations such as alimony or child support are always nondischargeable. However, through Chapter 13 bankruptcy, you can discharge your obligation to your spouse or former spouse for other debts assigned to you in divorce or separation proceedings.
Example. Let's assume in your divorce decree you were assigned and required to pay the entirety of a joint credit card you held with your spouse. If you don't pay it, the credit card company can go after both you and your former spouse, despite the family court order assigning the debt to you. You are broke and fail to pay the balance. Consider the following results, which vary depending on which type of bankruptcy you file:
- You're broke and file for Chapter 7. By operation of the automatic stay, the credit card company can't come after you for the debt while you're in an active Chapter 7 case. Later, the discharge prevents the credit card company from ever collecting from you. If your former spouse ends up having to pay the debt, he or she can come after you for that money. Suing someone whose actions resulted in your being ordered to pay someone else's money is called indemnification.
- You're broke and file for Chapter 13. While you're making payments under your Chapter 13 plan, a tool called the co-debtor stay prevents creditors from trying to collect from the spouse (or ex-spouse) who didn't file bankruptcy. If the debt is paid off through the plan, the former spouse is free of the debt, also. If a balance remains at the end of the Chapter 13 plan, the creditor might come after the former spouse for payment. Plus, unlike Chapter 7, the former spouse can't get the money from you because the Chapter 13 discharges that indemnification obligation.
Post-Petition Homeowners' Dues
When you let go of a home in a Chapter 7 case, you'll remain responsible for property taxes, utility bills, and homeowners' dues until the home's title is no longer in your name (in other words, until the lender sells it in foreclosure). Some bankruptcy courts, but not all, don't hold you responsible for homeowners' dues if you surrender your home as a part of a Chapter 13 plan.
Government Fines, Penalties, and Forfeitures
You'll be able to discharge obligations you owe to a city, county, state, or other governmental agency in Chapter 13 bankruptcy, including those arising from fraud. However, you'll have to pay any restitution or a criminal fine incurred in criminal sentencing.
Unsuccessful Bankruptcy Case Debt
If the court found that you weren't entitled to a discharge in a previous bankruptcy case (perhaps you didn't meet the Chapter 7 means test) or if you waived your discharge, you might be able to get rid of debt in Chapter 13. If a judge declared a particular debt nondischargeable, however, you won't be able to get rid of it by filing another case.
Stripped or Crammed-Down Liens
Typically, bankruptcy doesn't get rid of a creditor's security interest (such as a mortgage or car lender's lien) on your property. However, if certain conditions are satisfied (for instance, the debt isn't fully secured by the collateral, and the property is worth less than what's owed) Chapter 13 bankruptcy allows you to strip off a wholly unsecured junior lien or cram down a secured debt (reduce the loan to match the property value). The stripped or reduced portion gets reclassified as an unsecured debt and discharged at the end of the case. (To learn more, see What is Lien Stripping in Chapter 13 Bankruptcy? For more information on cramdowns, go to Cramdowns in Chapter 13 Bankruptcy: The Basics.)
Other Unusual Debts
A few other debts you'll be able to discharge include:
- debt arising from a wrongful act committed against a federally insured bank or credit union
- court fees incurred by a prisoner who files a lawsuit, motion, appeal or court document, and
- debts arising from securities law violations.
When Will You Receive the Chapter 13 Discharge?
Before you receive a discharge in Chapter 13 bankruptcy, you have to pay back a certain amount of your debts through a repayment plan. But your repayment isn't dependent on the total amount of debt that you owe. Rather, your repayment plan amount depends on the type of debt you have, the value of your property, your income, and your expenses.
Specifically, you're required to pay the greater of the following to your unsecured creditors:
- your disposable income (the amount remaining after deducting allowable expenses), or
- the value of your nonexempt property (the property that you can't protect with a bankruptcy exemption).
The bankruptcy trustee pays creditors depending on the priority of the particular debt. Certain priority debts (such as recent taxes, alimony, and child support) must be paid in full, unlike nonpriority unsecured debts.
And while it's possible that you might pay less than what you owe (especially if you have a lot of credit card or medical debt), if all of your debt is priority debt, such as recent income tax balances and support obligations, then you'll repay it all.
After you complete all plan payments, any remaining qualifying balances get wiped out. Creditors can no longer come after you to collect those debts.
To learn more, see Unsecured Debt in Chapter 13: How Much Will You Pay?
