Frequent Chapter 13 Questions

A discharge of a debt means you are no longer liable for that debt. Under Chapter 13, you generally must complete your court-approved repayment plan in order to obtain a discharge.

According to the Bankruptcy Code, your "plan need not pay unsecured claims in full as long as it provides that the debtor will pay all projected 'disposable income' over an 'applicable commitment period,' and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor's assets were liquidated under Chapter 7." (11 U.S.C. § 1325)

"In chapter 13, 'disposable income' is income (other than child support payments received by the debtor) less amounts reasonably necessary for the maintenance or support of the debtor or dependents and less charitable contributions up to 15% of the debtor's gross income. If the debtor operates a business, the definition of disposable income excludes those amounts which are necessary for ordinary operating expenses." (11 U.S.C. § 1325(b)(2)(A) and (B))

If this is the case, you would pay your lender directly rather than paying the court-appointed trustee. Typically, once protected by Chapter 13, you make payments to your trustee for purposes of disbursement to creditors. However, if the court has not yet confirmed your plan, you would continue to interact with your lender yourself. The amount paid would then be deducted from the amount you would have paid the court-appointed trustee.

Completing a Chapter 13 repayment plan can be difficult; some statistics say 90% of Chapter 13 bankruptcies fail. However, once the court has confirmed your plan, you are legally bound to adhere to the payments and schedule set forth within it. If circumstances arise that are outside of your control, you may be eligible for a "hardship discharge." An experienced bankruptcy attorney can advise you of your eligibility for such a discharge.