What Happens at the End of a Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a long process. Unlike Chapter 7, which wipes out your debts after a few months, Chapter 13 takes several years. At the end, though, unless problems arise, the bankruptcy court will wipe out your debts.

In Chapter 13, you spend three to five years paying all your disposable monthly income to a bankruptcy trustee supervising your case. The trustee pays your creditors each month. The top-priority debts are those unaffected by bankruptcy, such as child support. Next come debts secured by collateral, such as a mortgage. Last in line are unsecured debts such as credit card bills. If your income exceeds the state median, you give up your disposable income for the next five years to your creditors. If you're under the median, usually you only have to pay for three years.

At the end of the plan, you should be caught up on all priority debts and secured debts. If all goes well, the bankruptcy court will wipe out your unpaid unsecured debts with a bankruptcy discharge. You're free to start over financially.

Once you make the last payment in your bankruptcy plan, the trustee managing your case audits your accounts. The audit will be finished between two weeks and 30 days after the final payment. If there's any money left over from your last payments, you get a refund.

The trustee files her audit report with the clerk of the bankruptcy court. Within 10 to 15 days, if there are no problems, the clerk drafts a discharge order. He sends a copy of the order to you, your attorney and the case trustee. As soon as the trustee receives the order, she files with the court to close your case. This happens within 11 to 16 days after filing the audit. The court returns a signed copy of the order to the trustee, who closes your file.

Once you receive the discharge, your unsecured debts cease to exist. Those creditors have no legal right to pursue you for what you once owed; in fact, it's illegal for them to try. The clerk of court notifies creditors by mailing them a copy of the discharge order. This is a blanket mailing so even creditors with debts that survive bankruptcy receive a copy. If a creditor doesn't receive the order for any reason, the discharge still applies.

Before issuing the discharge order, the bankruptcy court will review your case to confirm that everything complies with the law. If it fails certain requirements, the court can deny your discharge.

• You must complete a financial-management course before getting your discharge.

• If you filed a previous Chapter 13 case within the past two years and received a discharge, you aren't entitled to have your debts discharged again.

• If you received a discharge in a Chapter 7, 11 or 12 bankruptcy filed four years before filing Chapter 13, you're likewise out of luck.

Unlike with Chapter 7, creditors have no standing to object to your discharge once you've completed the Chapter 13 payment plan.