Many people who think about getting debt discharged may assume it can only
be erased through
Chapter 7 bankruptcy . In fact,
Chapter 13 bankruptcy has the ability to not only discharge debt, but in some cases may help
eliminate debt that is not eligible for discharge in Chapter 7. Meaning,
you may be given a greater advantage in Chapter 13 when it comes to wiping out debt.
When a discharge is received in Chapter 13 bankruptcy, it comes after the
debtor repays a portion of the debt. How much paid toward outstanding
debt may depend on income and expenses of the debtor. Debt considered
as a non-priority or unsecured may not need to be repaid in full. The
length of a Chapter 13 case could be anywhere from 3 to 5 years, but if
you follow your repayment schedule successfully, any remaining amount
unpaid may be granted a discharge.
Non-priority unsecured debts include personal loans, credit card debt,
medical bills, and in some cases, qualifying
tax debt. For secured debts, such as a mortgage or vehicle loan, you may be able
to have liens stripped or reduced depending on the collateral. A vehicle
may qualify for a “cram down” if the collateral is worth less
than the amount due on the loan agreement.
Chapter 13 bankruptcy may help discharge debt that is considered non-dischargeable
in Chapter 7 such as obligations related to a divorce decree, separation
property settlement, taxes, and willful or malicious property damage claims.