Filing for Chapter 13 bankruptcy in Augusta, GA, can be a life-saving option for individuals struggling with debt. However, not all debts are treated equally under the law. Some debts, such as credit card balances and medical bills, may be completely discharged. Other obligations, such as taxes, child support, and student loans have different rules. It is essential to understand how these specific types of debt are handled in a Chapter 13 plan to make informed financial decisions.
Priority Debts: Taxes and Child Support
In bankruptcy law, some debts are classified as “priority claims”, which means they must be paid in full through a repayment plan. These include income taxes (under certain conditions) and domestic support obligations, such as child support and alimony.
Taxes in Chapter 13
Not all tax debts can be eliminated, but Chapter 13 bankruptcy offers significant relief for some taxpayers. Under the bankruptcy code, recent income taxes (typically those less than three years old) cannot be discharged and must be paid in full through a Chapter 13 repayment plan. However, older tax debts may be discharged if they meet certain criteria, such as having been filed on time. Filing for Chapter 13 immediately stops IRS wage garnishment and tax levy due to the automatic stay provided by the bankruptcy court under the relevant bankruptcy code section.
In addition, Chapter 13 provides an opportunity to pay back tax debt without additional penalties or interest accruing, offering a structured way to resolve what could otherwise be an overwhelming burden.
Child Support and Alimony
Domestic support obligations, such as child support and spousal maintenance, are among the most important debts that need to be considered in bankruptcy proceedings. According to § 1322(a)(4) of Title 11 of the United States Code, these obligations must be paid in full during a Chapter 13 bankruptcy case. Failing to pay these obligations after filing for bankruptcy can lead to dismissal of the case.
However, Chapter 13 offers some protection: it stops collection actions for past-due payments and allows you to pay off arrears over a period of 3–5 years. This can help prevent driver’s license suspensions and other enforcement measures that are common in Georgia for unpaid child support.
Student Loans: Limited Relief, But New Flexibility
Historically, it has been nearly impossible for student loan debt to be discharged in bankruptcy, unless the borrower can prove “undue hardship” under 11 U.S.C. § 523(a)(8). Although this high standard remains, recent policy changes have introduced new options under Chapter 13 bankruptcy.
Although student loans are often considered non-priority and unsecured, they are rarely eliminated at the end of a Chapter 13 bankruptcy case. However, your monthly payment plan may include a portion towards student loans, which could potentially reduce your out-of-pocket costs during the repayment period. Most importantly, the automatic stay prevents wage garnishment and collection calls from creditors during your bankruptcy case.
In August 2023, the US Department of Justice and the Department of Education released updated guidance encouraging a more flexible approach to student loan treatment in bankruptcy cases. While this shift did not change the law itself, it has led some courts to approve partial discharge or more manageable repayment plans under Chapter 13, especially for borrowers with permanent disabilities or facing extreme financial hardship.
How Duncan Bankruptcy Law Can Help
At Duncan Bankruptcy Law, we recognize that each client’s situation is unique. Whether you are behind on child support payments, facing IRS collection efforts, or struggling with federal student loan debt, our Augusta-based attorneys create customized Chapter 13 plans that comply with federal regulations while providing maximum financial assistance.
We have successfully helped thousands of Georgians avoid garnishment, protect their homes and regain control of their finances. Our team is always up to date on the latest changes in bankruptcy law, including recent developments regarding student loans. This allows you to benefit from the most current legal strategies.
Take the Next Step Toward Financial Freedom
If your paycheck disappears before you can cover your basic needs, chapter 13 bankruptcy may offer relief you deserve. Although taxes and child support must generally be paid in full, student loans can still be difficult, a carefully designed plan can help combine these payments into a manageable monthly payment that is often much lower than creditors would require outside of bankruptcy.
You don’t have to go through this alone. Contact the Duncan Bankruptcy Law team today for a free consultation. Our experienced Augusta attorneys can help you determine whether Chapter 13 bankruptcy is the right option for your situation and help you create a realistic plan for moving forward.
