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A Chapter 13 bankruptcy is a repayment plan. You propose a Chapter 13 plan that details how you will reorganize your debts. When you file for bankruptcy under Chapter 13, you must list all debts you owe in your Chapter 13 schedules. However, not all debts are treated the same in your Chapter 13 plan. An experienced Massachusetts bankruptcy attorney explains what can and cannot be included in Chapter 13 bankruptcy in this blog.
What Debts Are Included in a Chapter 13 Bankruptcy in Massachusetts?
All debts are included in your Chapter 13 case. However, some of those debts are not dischargeable. Your bankruptcy discharge eliminates your legal obligation to repay a debt. In other words, the creditor cannot force you to pay or take action to collect a discharged debt.
Debts in Chapter 13 are divided into three categories. Each category contains debts that cannot be discharged in bankruptcy.
Secured Debts in a Massachusetts Chapter 13 Bankruptcy
Secured debts have collateral securing the loan. If you do not repay the debt, the creditor can seize and sell the collateral. Mortgage loans and car loans are two of the most common types of secured debts.
In Chapter 13, secured debts are not dischargeable. You must repay the debt or surrender the collateral. If you surrender the collateral through Chapter 13, you can discharge any deficiency that remains after the property is sold. A deficiency is the amount you owe after collateral is sold and the proceeds are applied to the debt.
However, you can catch up on past-due mortgage payments through your Chapter 13 plan to stop foreclosure. You can also include your car loan in your Chapter 13 plan and possibly modify the loan terms to lower the amount you owe to pay off the loan.
Unsecured Debts in a Massachusetts Chapter 13 Case
Unsecured debts are debts that do not have collateral. Most unsecured debts are paid a percentage of what is owed on the debt. The remaining balance is discharged when you complete your case. Examples of general unsecured debts subject to a discharge include medical bills, credit card debt, and some old income tax debts.
However, some unsecured debts cannot be discharged. If they are not paid in full through your Chapter 13 case, you will continue to owe these debts after the Chapter 13 case has ended.
Unsecured debts not subject to a bankruptcy discharge include, but are not limited to:
- Certain taxes and debts owed to the government
- Administrative costs of the bankruptcy, including fees owed to your bankruptcy attorney and the Chapter 13 trustee
- Alimony and child support payments
- Debts arising from the personal injury or death of someone caused by a DUI accident that was your fault
- Overpayment of government benefits
- Most educational loans funded by the government
- **Restitution and criminal fines
Some of these debts may be paid in full through your Chapter 13 plan, so you don’t have to worry about the debts after you complete Chapter 13. For example, you can pay past-due alimony and child support through the plan, but you must resume making regular support payments due outside of the plan. You can also pay past due taxes through the plan to take care of government debts.
Contact Our Massachusetts Bankruptcy Attorneys for More Information
Contact our office if you are interested in filing a Chapter 13 bankruptcy or have questions about bankruptcy. Our Massachusetts bankruptcy lawyers review your options for dealing with debt, including how to get rid of debts you cannot afford to pay.