In a Chapter 13 bankruptcy, you must repay some debts in full through your Chapter 13 plan. Most debtors pay unsecured, nonpriority creditors in part through the plan, and then the remainder of the debt is discharged at the end of the bankruptcy. (To learn which debts must be paid in full and in part, see Debts That Must Be Paid in Chapter 13 Bankruptcy.)
However, some remaining nonpriority, unsecured debts are not discharged when your Chapter 13 plan is complete. Read on to learn the details.
Certain types of debts survive Chapter 13 bankruptcy, regardless of your income or circumstances.
In both Chapter 7 and Chapter 13 bankruptcies, child support and alimony you owe directly to an ex-spouse or child are nondischargeable. Your Chapter 13 repayment plan must provide for 100% repayment of these debts. Although you don’t have to completely pay back support you owe to a governmental child support collection agency during the life of your plan, any amount that is left over after you complete your plan is not dischargeable.
Debts you owe on fines or restitution orders contained in the sentence for conviction of any crime (yes, even traffic tickets) may not be discharged in Chapter 13.
If you have been fined by a government agency for some reason, or subjected to a penalty or a forfeiture of property, this debt will not be discharged. However, if the government agency assesses the fine because you were overpaid benefits due to your failure to report income or for some other faulty behavior, only the fine itself is not dischargeable. The amount you were overpaid is dischargeable like any other unsecured debt. However, if the agency files an action in court alleging that you obtained the overpayment through fraud, the court can rule that the overpayment is not dischargeable.
Recent income tax debts—those that first became due within the three-year period prior to your filing date—are priority debts and have to be paid in full in any Chapter 13 plan. If your Chapter 13 ends prematurely for any reason, the tax debts you have not yet repaid will remain; you will either have to pay them outside of bankruptcy or convert your Chapter 13 to a Chapter 7 bankruptcy. (For more details, see Tax Debts in Chapter 13.)
If you operate a vehicle while illegally intoxicated by alcohol or drugs, and you kill or injure someone, any debt arising out of the injury is not dischargeable. But what if you are sued and the judge or jury finds you liable but doesn’t specifically find that you were intoxicated? This may not help you: The judgment against you won’t be discharged if the bankruptcy court (or a state court in a judgment collection action) determines that you were, in fact, intoxicated.
Note that this rule applies only to personal injuries: Debts for property damage resulting from your intoxicated driving are dischargeable.
If a creditor obtains a judgment against you in civil court for personal injury or death caused by your willful or malicious act, the judgment will be nondischargeable.
Unlike the “willful and malicious” category of debts that may be nondischargeable in Chapter 7, a creditor in a Chapter 13 case need not go to court to prove that the debt should not be wiped out. Instead, these debts are automatically nondischargeable. Note that the act which gives rise to the debt need only be willful or malicious to be nondischargeable in Chapter 13, which greatly expands the types of debt that will survive discharge. For instance, a judgment for injury caused by your reckless driving would most likely survive Chapter 13 bankruptcy on the ground of “maliciousness,” whereas it might be discharged in Chapter 7 because reckless driving, through malicious, is seldom considered willful.
Finally, unlike Chapter 7, which includes damage to property, this exception to a Chapter 13 discharge applies only to debts arising from personal injury or death.
Bankruptcy requires you to list all your creditors on your bankruptcy papers and provide their most current addresses. That way, the court can mail out notice of your bankruptcy with the best chance of reaching them. If you do your part and the official notice fails to reach the creditor for some reason beyond your control—for example, because the post office errs, or the creditor moves without leaving a forwarding address—the debt will still be discharged (as long as it is otherwise dischargeable). Also, if the creditor knew or should have known of your bankruptcy through other means, such as a letter or phone call from you, the debt will be discharged.
Suppose, however, that you forget to list a creditor on your bankruptcy papers or carelessly misstate a creditor’s identity or address. In that situation, the court won’t notify the creditor and the debt almost always will survive your bankruptcy (unless the creditor wouldn’t have received any payments under your plan, a very rare occurrence). The general rule is that debts not listed in a Chapter 13 case survive the bankruptcy. This means, of course, that you should be extra careful to list all of your creditors in a Chapter 13 case. Also, if a creditor fails to file a proof of claim, you would be well advised to file one for it, especially if the claim is for a secured debt.
As in Chapter 7, a student loan cannot be discharged in Chapter 13 unless you show the bankruptcy court that paying the loan back would be a substantial hardship. In certain situations, you might be able to discharge the interest on student loans (but not the principal).
Debts based on fraud, theft, or breach of fiduciary duty are not dischargeable in Chapter 13. Bankruptcy courts in Chapter 13 cases use the same procedure for determining the dischargeability of these debts as they use in Chapter 7 cases -- that is, the debt will be discharged if the creditor fails to come forward and establish fraud in the bankruptcy court.