When you file for bankruptcy you may learn that your debts have been “discharged” at the conclusion of your case. What this means is that your debts are no longer enforceable, or collectible, by the creditor. This is the ultimate goal of filing for bankruptcy and the desired outcome by anyone seeking its protection.
Whether you file for Chapter 7 or Chapter 13 bankruptcy, the end result of a successful case is a debt discharge.
However, it is how the debts are managed in either of these types of bankruptcy that can be quite different.
In a Chapter 7 case, the court will evaluate your income and asset level to determine if there is any possibility for debt repayment. This may be done through a portion of your disposable income or the liquidation of some nonexempt assets. It is important to note that the court will not require you to pay an amount, or liquidate assets, that would cause you further financial burden.
In a Chapter 13 case, the court will develop a repayment plan by evaluating your income and asset level to determine the amount deemed appropriate for your budget. By spreading out your payments over the course of three to five years, a greater portion of your debts may be repaid compared to a Chapter 7 case. However, an important difference is that these payments also grant a higher level of protection for even nonexempt assets, like luxury items.
It is important to note that in either Chapter 7 or a Chapter 13 case, there are some debts that are not eligible for a discharge and will require repayment. These are called “priority debts”, and are considered as such by Congress to be of importance for satisfaction. Common examples of these debts not eligible for a discharge are alimony, child support, debts accumulated fraudulently and criminal restitution payments. Further, some tax debts and student loan debts may also not be eligible for discharge in bankruptcy.
If you are considering bankruptcy, speak to a Dayton bankruptcy attorney about your debts to ensure you obtain the best outcome in your case filing.