A chapter 13 bankruptcy is also known as the wage earner’s bankruptcy. In Chapter 13, you can keep your property and repay your debts over a period of time, often 3 to 5 years. Your repayment must be approved by the bankruptcy court. Once your Chapter 13 Plan is approved, you begin making payments according to the plan, and when your payments are complete, any remaining unpaid debts will be discharged.
A chapter 13 discharge applies to debts incurred prior to bankruptcy filing. Creditors may still collect debts that happen after a bankruptcy filing. The bankruptcy laws relating to the chapter 13 discharge is complex so debtors in New York might consider consulting competent legal counsel before filing chapter 13 to learn about the chapter 13.
A chapter 13 debtor in New York is entitled to a discharge after completion of all payments under the repayment plan as long as the debtor:
- Certifies all domestic support obligations such as alimony or child support that came due before making such certification have been paid;
- Has not received a discharge in a prior case filed within a certain time frame (two years for prior chapter 13 cases and four years for prior chapter 7, chapter 11, and 12 cases); and
- Finishes an approved course in financial management if the U.S. trustee decides courses are available to the debtor.
The chapter 13 discharge releases the New York debtor from all debts provided for by the repayment plan. For the person deep in debt who wants to keep property, chapter 13 is better than a private repayment plan directly with a creditor or other arrangement because all actions are monitored by the court. The repayments are made to a trustee who then pays off the creditors. Creditors provided for in full or in part under the chapter 13 repayment plan may no longer initiate or continue any legal or other claim such as a lawsuit or arbitration proceeding against the debtor to collect the discharged debts.
Debts not discharged in chapter 13 bankruptcy include certain a home mortgage, debts for alimony or child support, certain taxes, debts for government funded or guaranteed educational loans, debts arising from death or personal injury caused by driving under the influence of alcohol or drugs, and debts for criminal restitution. If there are domestic support obligations, the trustee often requests the debtor to provide an agreement or court order on the child support or alimony to prove the amounts. The trustee exists to protect creditors so wants to make sure all payment obligations are correct. If debts not dischargeable in bankruptcy are not fully paid under the chapter 13 repayment plan, the debtor will remain responsible for these debts after the bankruptcy case concludes.
To learn how to get a fresh financial start, contact an experienced New York bankruptcy attorney.