What is a ‘Chapter 13 Bankruptcy Discharge?’

Similar to a Chapter 7, a chapter 13 plan also provides a discharge of debts upon completion. However, unlike the chapter 7 bankruptcy process, in order to get a discharge in a chapter 13 bankruptcy, debtor(s) must complete their plan of reorganization. This means that the debtor(s) must complete payments under the terms of the plan for 36 - 60 months. Further, the debtor must submit all required tax returns to the Trustee’s office and also fulfill procedural requirements like the Financial Management Course, request for discharge and all other requirements needed to complete the plan.

Failure to meet the procedural requirements of a chapter 13 plan can keep debtor(s) from receiving a discharge.

In chapter 13 cases with a lien avoidance motion, in order to effectively eliminate the second or third mortgage, the debtor needs to properly complete and finish their plan of reorganization. While case law may be divided upon whether a lien strip is effective upon the order granting the lien avoidance or upon completion of the bankruptcy plan, within the 9th Circuit, judges have indicated that a lien avoidance motion while valid upon it being granted, it is not effective against the creditor until the plan of reorganization is completed and a discharge order is issued.

Upon issuance of the order of discharge, the individual debtor or debtors can go to the county recorders office and properly remove the pending unsecured mortgage.