The Discharge

For chapter 13 debtors in general, garnering a discharge is the goal of filing for Chapter 13 bankruptcy, which cannot be achieved for at least three to five years. In many cases, a debtor may not achieve a discharge at all.

Procedure to Achieve a Discharge

Procedurally, a chapter 13 debtor is entitled to a discharge upon (1) completing all payments under the plan and (2) the filing of a certification that all domestic support obligations-namely alimony and child support-have been paid. Completing a chapter 13 plan is a hard task and many debtors are unsuccessful. The required plan payments are often a serious burden to the debtor.

To complete all payments under the plan a debtor must (1) make all plan payments; and (2) those payments must be sufficient to fund the plan.  As an example, a Nebraska bankruptcy court confirmed a plan that:

1) provided for payments of $100 for 36 months;

2) required payment of all claims entitled to a priority; and

3) upon sufficient payment for the priority creditors, the Trustee paid general unsecured creditors on a pro rata basis.

The Trustee initially estimated that $3600 would adequately fund the plan. Thirty-six months and $3600 later, the debtor moved for a discharge.  The Trustee objected, claiming that the debtor did not complete plan payments because priority claims totaled just over $3700.  The court held that because payment of all priority claims was required under the plan and that provision of the plan was not satisfied, not all plan payments had been made. Therefore, the court denied the debtor’s motion for a discharge.

Shorter Time Frame

Using similar logic, some courts, including a California bankruptcy court, denied a discharge to debtors who completed plan payments of a 36-month plan in a shorter period. Other courts disagree, holding that a plan is complete when a debtor makes all plan payments to a trustee, regardless whether the debtor completed the term of the plan.

Payments Not Distributed

One court held that simply making  payments, according to the plan, to the Trustee is sufficient for an order of discharge. The Trustee need not actually distribute those payments for the debtor to have completed the plan.

Certification

Upon completion of payments under the plan, the debtor must, in writing, certify that all domestic support obligations, owing at the time the petition was filed, are currently paid or are paid in full. Failure to provide such certification will result in the court not entering the discharge order.

As the chapter 13 Trustee is obligated to send a notice of plan completion to the domestic support holder, who is usually the ex-spouse, the trustee may withhold filing a notice of completed plan until the debtor supplies the Trustee with current employment information and an address.

If you are earning a wage and are suffering from debt problems, filing for Chapter 13 bankruptcy protection may help alleviate your suffering. To see if it is right for you, contact the experienced consumer bankruptcy attorneys at the Law Office of Melanie Tavare today.