What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, often referred to as a “wage earner’s plan,” enables individuals with regular income to create a strategy for repaying a portion or all of their debts. In Massachusetts, as in the rest of the United States, Chapter 13 is governed by federal bankruptcy laws. However, there are state-specific exemptions and considerations to be aware of.
How Does Chapter 13 Work?
Upon filing a Chapter 13 bankruptcy petition, the debtor proposes a repayment plan which generally lasts from three to five years. A bankruptcy trustee oversees the distribution of funds to creditors.
But while Chapter 13 allows for the reorganization of a variety of debts, not all obligations can be incorporated into the repayment plan.
Which Debts Are Generally Included?
The kinds of debts that are usually eligible for inclusion in a Chapter 13 bankruptcy plan include secured debts like mortgages and car loans, as well as unsecured debts such as credit card balances and medical bills. A significant benefit of Chapter 13 is the ability to retain assets like your home or vehicle while making payments.
Which Debts Cannot Be Included in Chapter 13 in Massachusetts?
While Chapter 13 offers a broad framework for debt reorganization, there are specific kinds of obligations that cannot be incorporated into your plan. These are:
1. Alimony and Child Support: Obligations arising from family court, such as alimony and child support, cannot be discharged or reorganized under Chapter 13.
2. Student Loans: Federal law places severe restrictions on discharging student loans through bankruptcy. Unless you can prove “undue hardship,” these cannot be included.
3. Certain Tax Debts: Income tax debts may be dischargeable under certain conditions, but other types of taxes, such as payroll taxes, are generally not eligible for inclusion.
4. Criminal Fines and Restitutions: If you have been convicted of a crime and ordered to pay fines or restitution, these debts are not dischargeable in a Chapter 13 bankruptcy.
5. Debts for Personal Injury Caused by Intoxication: If you owe money due to causing personal injury or death while driving intoxicated, these debts are not dischargeable.
6. Debts Incurred After Filing for Bankruptcy: Any debts you incur after filing your bankruptcy petition are not part of the Chapter 13 repayment plan.
7. Homeowner Association Fees: Although you can catch up on past-due homeowner association fees, ongoing fees that accrue after filing for bankruptcy aren’t typically included.
8. Non-dischargeable Debts from a Prior Bankruptcy: Debts that were deemed non-dischargeable in a previous bankruptcy proceeding remain so in subsequent Chapter 13 filings.
What Are the Legal Implications of Excluding Certain Debts?
Excluding certain debts from your Chapter 13 repayment plan doesn’t absolve you of the responsibility to pay them. It merely means that those debts will have to be settled outside the confines of your bankruptcy plan. These non-dischargeable debts remain, and creditors can take legal action to collect them once your Chapter 13 case concludes.
If you’re contemplating filing for Chapter 13 bankruptcy in Massachusetts, a comprehensive understanding of what debts can and cannot be included is crucial. Legal intricacies can significantly impact the success of your bankruptcy plan and your financial future. An experienced debt relief lawyer can offer invaluable insight into the process.
Call Benner Law at (774) 404-8321 for a free case evaluation!