What Happens at the End of a Chapter 13?

By Heather Frances J.D.

Debtors typically file for bankruptcy to receive a financial fresh start. Though there are multiple types of bankruptcy available, Chapter 13 is a common type of individual bankruptcy that, like other types, allows the debtor to pay some debts while erasing others, and Chapter 13 automatically prevents collection actions while the case is ongoing. Chapter 13 can even stop foreclosure or vehicle repossession. Once the case is successfully completed, many unpaid debts will be erased.

Chapter 13

Unlike a Chapter 7 bankruptcy, in which assets are liquidated, a Chapter 13 bankruptcy reorganizes your debt. You keep your property, but you pay back all your debts over a three- to five-year period, under a court-approved repayment plan. If your income is irregular or too low, or if your debt burden is too large, the court might not allow you to file for Chapter 13 bankruptcy.

Repayment Plan

A trustee will administer your repayment plan. You pay the trustee and the trustee pays your debts. Certain types of debt, such as child support, are given priority consideration for repayment, and secured debts also must be paid. Secured debts are those that are secured by collateral, such as mortgages and auto loans; unsecured debts, such as credit cards, are not secured by collateral. Under the repayment plan, any of your disposable income – money left over after you pay for your basic needs like food and shelter – must go toward paying your unsecured debts. You don’t have to repay your unsecured debts in full, or sometimes at all. You just have to show that you are paying your disposable income toward those debts.

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Once you complete your repayment plan, your remaining debts are eligible for discharge. A discharge means those debts will be erased, even if they have not been fully paid. Before you can receive a discharge, you must show the court you are current on any child support and alimony obligations you might have since these are not erased as part of the discharge. You must also complete a financial counseling course approved by the U.S. Trustee Program.

Nondischargeable Debts

Some debts are not discharged in a Chapter 13 bankruptcy. These include certain long-term obligations, such as home mortgages, certain taxes, debts for most government-funded or government-guaranteed student loans, debts for government benefit overpayments and some debts from court cases. A discharge in a Chapter 13 bankruptcy is broader than a Chapter 7 discharge since a Chapter 13 discharge can include debts for willful and malicious injury to property, debts acquired to pay tax obligations, and debts from property settlements in divorce or separation proceedings.

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How to File Chapter 13 Bankruptcy to Clear Child Support


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Rules for Declaring Bankruptcy in Kansas

When a Kansas resident wants a clean financial slate, he may file for bankruptcy protection under Chapter 7 or Chapter 13. Both are forms of individual bankruptcy structured under the federal Bankruptcy Code, but Kansas cases are subject to Kansas’ exemption list and median income level. If you successfully complete your bankruptcy case, you may receive a discharge of your remaining unpaid debts.

How Does Reaffirmation in Bankruptcy Work?

Bankruptcy is about fresh starts. Filing for Chapter 7 protection allows your bankruptcy trustee to liquidate property you own outright, without liens, and apportion the proceeds among your creditors, although you can use exemptions to protect some property. You have to qualify by meeting certain income requirements, but if you do, bankruptcy legally erases any debts the trustee can't pay through liquidation. The bankruptcy process discharges them and you're not liable for paying them any longer – unless you reaffirm them.

Will I Lose My Car if My Chapter 13 Is Dismissed?

Vehicles are one type of asset the court can address during Chapter 13 bankruptcy, but a dismissal won’t necessarily affect your ownership of a vehicle that has been paid off. Since the only creditor who can repossess your vehicle is the one who holds the loan on it, none of your other creditors can take your car. However, if your case is dismissed, you may have to sell some of your assets, including your car, to raise the cash to pay your remaining debts.

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