Chapter 13 bankruptcy allows debtors to discharge certain debts that are ineligible for Chapter 7 relief.

When an individual files for bankruptcy, the primary decision they face is whether to opt for the straight liquidation option (Chapter 7) or a repayment plan that takes three to five years to complete (Chapter 13; or, rarely, Chapter 11). As always, this is a decision that should ideally be made in consultation with your Long Island bankruptcy attorney. But whichever you select, the customary result of this filing is a “discharge” that results in an eradication of your listed debts. There is, however, another distinction between these bankruptcy types that is often overlooked. Chapter 13 bankruptcy allows debtors to discharge certain debts that are ineligible for Chapter 7 bankruptcy relief. For this reason, you will often hear people talk about the Chapter 13 “super discharge” — referring to the fact that debtors who choose this option have additional rights that are unavailable in a standard liquidation.
It is widely known that bankruptcy does not eradicate all types of liabilities. Student loans usually crop up in any discussion of non-dischargeable debts, but there are other kinds as well. What many people do not realize, though, is that there are a few kinds of generally non-dischargeable debts that can be eliminated in Chapter 13. Obviously, this makes Chapter 13 an attractive option for those burdened by these types of debts. So what are these special debt categories? To answer that question, let’s take a brief look at the history of bankruptcy law.
In 1978, the U.S. Congress decided to create incentives for individuals to pick Chapter 13 bankruptcy over the immediate relief provided by Chapter 7 liquidation. Legislation made it possible for Chapter 13 filers to discharge liabilities derived from tax fraud, civil fines, malicious injury to individuals, and a few other unpleasant eventualities — which were not covered by the rules of Chapter 7. This state of affairs did not last long, however; during the 80s and 90s, Congress revised the law several times to chip away at these generous provisions. The main rollback to debtor rights came in October 2005 with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). This much-criticized legislative act made a large number of changes to bankruptcy law, including the removal of many kinds of debts from the coverage offered by a Chapter 13 super discharge.
As things stand now, there are only a handful of debt categories that qualify for a so-called super discharge; these include non-support spousal obligations (e.g., property settlement debts), malicious injury debts, and civil penalties. Since 2005, debtors have been unable to use Chapter 13 to get rid of liabilities associated with unfiled tax returns, breach of fiduciary duty, and similar infractions. Some people are unaware of these new rules and mistakenly assume, based on outdated information found on the Internet, that they’ll be able to ditch their burdensome tax debts with Chapter 13. It’s not necessarily so, however — this is the point of our little trip through legislative history in the previous paragraph. The super discharge simply isn’t what it used to be.
An experienced attorney can help you explore these little nuances in bankruptcy law. Call Long Island Chapter 13 bankruptcy lawyer Ronald D. Weiss today.