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The Chapter 12 Discharge

In  a Chapter 12 bankruptcy cases, the debtor is usually entitled to a discharge upon completion of all payments under the repayment plan.  The debtor has to certify that all domestic support obligations, if any, that came due before making such certification have been paid.  The discharge has the effect of releasing the debtor from all debts provided for by the plan allowed under section 503 or disallowed under section 502, with limited exceptions.

Creditors do not have standing to object to the discharge of a Chapter 12 debtor.  Creditors can object to confirmation of the repayment plan, but cannot object to the discharge if the debtor has completed making plan payments.  Those creditors who were provided for in full or in part under the plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.

A Chapter 12 debtor is also discharged by granting “hardship discharge” under special circumstances even though the debtor has failed to complete plan payments.  A hardship discharge is available only to a debtor whose failure to complete plan payments is due to circumstances for which the debtor “should not justly be held accountable.”

Certain categories of debts are not discharged in chapter 12 proceedings.  Given below are some major categories of debts that are not discharged in chapter 12 proceedings:

  • Debts for alimony and child support;
  • Money obtained through filing false financial statements;
  • Debts for willful and malicious injury to person or property;
  • Debts for death or personal injury caused by the debtor’s operation of a motor vehicle while the debtor was intoxicated; and
  • Debts from fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny.

The non dischargeable debts should be paid in full under a plan.  About secured obligations, those debts may be paid beyond the end of the plan payment period and, therefore, are not discharged.

Inside The Chapter 12 Discharge