In New Jersey and around the country, some people choose to file for Chapter 13 bankruptcy to restructure their debts and repay a portion of what they owe through court-approved plans before receiving discharges of their remaining unsecured debt balances. While Chapter 13 bankruptcy can help people to regain financial footing, there are certain types of debts that cannot be discharged.
Debts that cannot be discharged through Chapter 13 bankruptcy
Many types of debt can be discharged through Chapter 13 bankruptcy as long as you successfully complete your repayment plan. However, the following obligations will not be eligible for a discharge:
- Spousal support/alimony
- Child support
- Certain tax liabilities
- Student loan debt unless repayment would cause undue hardship
- Criminal fines or restitution
- Personal injury judgment for driving while intoxicated
- Fraud-related debt
- Mortgage payments and other secured debts
What are the benefits of Chapter 13 bankruptcy for non-dischargeable debts?
While you cannot discharge the previously listed debts in Chapter 13 bankruptcy, you can use the repayment plan period to catch up on your arrearages. For example, if your home is in danger of foreclosure, you can stop it from happening by filing for Chapter 13 bankruptcy. You can then use the repayment plan period to catch up with your back payments while continuing to make your regular mortgage payments on time. Your priority debts will be paid first during the repayment plan over three to five years, and other types of unsecured debts will be discharged once you complete your plan.
Chapter 13 bankruptcy can help people to catch up on some of their payments. Many types of unsecured debt balances will also be discharged once the repayment plan is completed. People might then have more money available to keep current with their remaining debts.