Non-dischargeable debts are those few categories of personal liabilities which can never be discharged in either form of Chapter 7 or Chapter 13 bankruptcy. Non-dischargeable debts include most individual income taxes, many business-related taxes such as withholding tax and other trust fund taxes, domestic support obligations, spousal support/alimony and child support, debts related to fraud or fiduciary embezzlement, educational and student loans, unlisted debts and other less common types of debts. (Note that some divorce decree obligations may be dischargeable in Chapter 13.)
One of the great benefits of Chapter 13 over Chapter 7 is that certain non-dischargeable debts can be paid back over time in Chapter 13 plan, usually over five years, which can maximize a Chapter 13 debtor’s cash flow and repayment flexibility. For example in Chapter 13, you can stretch out repayment of priority debts—such as income taxes—over five years versus the standard two to three years the taxing authorities typically require outside of bankruptcy.
It’s important to note that most taxes, domestic support obligations and mortgage arrearages must be repaid in full through the Chapter 13 plan. Practically speaking, this means that the debtor’s budget must demonstrate that they afford the minimum monthly repayment required in order to repay the non-dischargeable over sixty months (in a five year plan). Your Chapter 13 attorney can help you calculate whether repayment of the non-dischargeable debts is feasible considering your monthly income and expenses.
The flexibility of time in repaying the few categories of non-dischargeable debts is a distinct advantage to Chapter 13. Whether a debt is discharged in bankruptcy is often fact-specific and you should seek the advice of an attorney for more information specific to your circumstances.
Wartchow Law Office advises clients in Minnesota on how Chapter 13 bankruptcy can provide relief and what they can expect from a Chapter 13 plan. Contact for a free consultation and more information on options available under Chapter 13 bankruptcy. Located in Edina, Minnesota.