Do You Receive Debt Forgiveness In Chapter 13?

There are some big differences between Chapter 7 bankruptcy and Chapter 13, and one of the differences involves debt forgiveness. Filing Chapter 7 typically offers more debt forgiveness; however, there are situations in which people do not qualify for this option. If you do not quality and decide to use Chapter 13, here are several things you should understand about the repayment of debts as well as debt forgiveness.

There are certain debts you must repay in full

Debt forgiveness is a term that refers to eliminating debts you have without paying them and while there are debts that might qualify for this in Chapter 13, there are debts that will not. Certain debts you have will be considered priority debts, and any debts that fall into this category are debts you must repay in full. Some examples of priority debts include child support, alimony, taxes, and mortgage loans. Most secured debts will also fall into this category if you file Chapter 13, including car loans. You must repay 100% of these types of debts, which means that you will not receive debt forgiveness for them.

There are other debts that might qualify for debt forgiveness

While most of your debts might fall into the priority debt category, you might have other debts that do not. Any types of debts you have that are unsecured will fall into a different category, and this includes medical bills you owe on and credit card payments. These types of debts are not those that you must repay in full; however, you might have to repay some of the balances. There is also a chance you will not have to repay any of them.

The amount you repay will typically be based on your disposable income

To determine if you must repay unsecured debts, your lawyer will carefully examine your current financial situation. This will involve carefully looking at your income and expenditures for priority debts. After comparing these amounts, the lawyer will subtract them and subtract out basic expenses needed for living, such as money for groceries and gas. After that, the lawyer will have an amount that represents your disposable income. The amount of your disposable income will determine if you must repay unsecured debts or not. If you have very little or none at all, you can expect the court to forgive all your unsecured debts.  

If you are interested in finding out which branch of bankruptcy you qualify for and which would be best for you, you should meet with a bankruptcy lawyer in your city. Check out a website such as