Why you might still file bankruptcy even though you are ineligible to get a discharge
Updated: Feb 8
Although not entirely common, it is possible that someone will want to file Chapter 13 bankruptcy even though he is ineligible for a discharge.
In those instances, the trustee will file a motion objection to discharge and the judge will grant it.
So why might you be ineligible for a discharge in a Chapter 13, and more importantly, why would you possibly not care?
A debtor is ineligible for a discharge in Chapter 13 when he has received a Chapter 7 discharge for a case filed within the last four years, or received a Chapter 13 discharge in within the past two years. See 11 USC 1328(f)(1) and F.R.B.P. 4004(a).
The primary reason someone would file Chapter 13 while being ineligible for a Chapter 13 discharge is the filing is the second step in a “Chapter 20 filing”. The debtor filed Chapter 7 previously to discharge unsecured debt, and now might not even have any debt at all.
Let’s take the scenario where the debtor might not have reaffirmed his mortgage and still is the title owner of his home. The debtor wishes to remain in his home, but it is up for foreclosure because the debtor was not current on the loan.
Even though the debtor does not legally owe a debt on the mortgage (and possibly no other debt), the debtor can stop the foreclosure by filing Chapter 13. The Chapter 13 will allow the debtor to stay in the home by paying off any arrears owed on the lien (even though the debt doesn’t exist).
Yes, technically the debtor will not be eligible for a discharge in this type of case. However, the lack of a discharge is irrelevant to the debtor, who has no legal debt to discharge anyway.
Peter Bricks is a Cumming personal injury and bankruptcy attorney, who maintains offices throughout the metro Atlanta area.