Certain debts that cannot be discharged in Chapter 7 can be discharged in Chapter 13. Read on to learn which ones.
(For a complete list of debts that cannot be discharged in Chapter 7, see Nondischargeable Debts in Chapter 7 Bankruptcy.)
Debts That You Can Discharge in Chapter 13 (But Not Chapter 7)
The debts that are not dischargeable in Chapter 7, but can be discharged in Chapter 13 bankruptcy are:
- marital debts created in a divorce or settlement agreement
- debts incurred to pay a nondischargeable tax debt
- court fees
- condominium, cooperative, and homeowners’ association fees incurred after the bankruptcy filing date
- debts for loans from a retirement plan, and
- debts that couldn’t be discharged in a previous bankruptcy.
What Happens If You Convert From One Bankruptcy Chapter to Another?
In most cases, bankruptcy filers may convert their cases from one chapter to another. If, for example, a court finds that a Chapter 7 filing is an abuse of the bankruptcy system under the means test, the filer can convert to Chapter 13 rather than dismiss the case altogether. Or, you may decide to convert because a particular debt will only be discharged in Chapter 13, for example, or because you won’t be able to complete a Chapter 13 repayment plan. Once you make the switch, you are subject to the dischargeability rules of the chapter to which you converted, not the chapter you started out using.
Example. Connie files for Chapter 13 bankruptcy because she owes a lot of debt from a divorce and has been told that those debts can be discharged in Chapter 13 but not in Chapter 7. Connie proposes a feasible Chapter 13 plan that pays only 25% of her divorce-related debt. Halfway through the plan, Connie loses her job and can’t continue her payments. She converts to Chapter 7. Her Chapter 7 discharge won’t include the divorce-related debts. However, Connie will receive a credit for the amounts she paid on those debts during her Chapter 13 case.
(To learn how other debts are treated in Chapter 13 bankruptcy, see Your Debts in Chapter 13 Bankruptcy.)