Part II: A Case Study in Chapter 13 Bankruptcy - Chapter 13: What Debts Are Disc
ID: 3197190 • Letter: P
Question
Part II: A Case Study in Chapter 13 Bankruptcy - Chapter 13: What Debts Are Dischargeable? In re Ryan - Read the case study below concerning Chapter 13 bankruptcy and answer the three questions at the end of the case study. Be certain to clearly identify your answers to all three questions and be complete in your responses.
389 B.R. 710 9th Cir. BAP, (Idaho, 2008)
On July 13, 1995, Ryan was convicted of possession of an unregistered firearm under 26 U.S.C. §5861(d) in the United States District Court for the District of Alaska. Ryan was sentenced to fifty-seven months in prison followed by three years of supervised release. In addition, Ryan was ordered to pay a fine of $7,500…, costs of prosecution in the amount of $83,420, and a special assessment of $50.00. Ryan served his sentence. He also paid the $7,500 fine. The district court, following an appellate mandate, ultimately eliminated the restitution obligation.
On April 25, 2003, Ryan filed a petition for bankruptcy relief under chapter 7 in the District of Idaho. He received his chapter 7 discharge on August 11, 2003. Shortly thereafter, Ryan filed a case under chapter 13, listing as his only obligation the amount of unpaid costs of prosecution owed to the United States (“Government”).…
Ryan completed payments under the plan, and an “Order of Discharge” was entered on October 5, 2006. The chapter 13 trustee’s final report reflected that the Government received $2,774.89 from payments made by Ryan under his plan, but a balance of $77,088.34 on the Government’s costs of prosecution claim remained unpaid. Ryan then renewed his request for determination of dischargeability. The bankruptcy court held that the unpaid portion of the Government’s claim for costs of prosecution was excepted from discharge by § 1328(a)(3). Ryan appealed.
The Court concluded that the exception to the discharge included in [Chapter 13] for “restitution, or a criminal fine, included in a sentence on the debtor’s conviction of a crime” does not cover costs of prosecution included in such a sentence, and REVERSED the bankruptcy court’s judgment.
Case Questions
1. What is the rationale for making some things dischargeable under Chapter 13 that are not dischargeable under Chapter 7?
Explanation / Answer
Not every debtor qualifies for the chatpter 7. In some cases ,repaying debt over time in court approved chapter 13 repayment plan provides benefits that are unavailable in chapter 7.
Reasons to file Chapter 13
It may be more appropriate for a debtor to choose chapter 13 when
1) you do not qualify for the chapter 7:- a debtor must qualify under the "means test " to file for the chapter 7. If the debtor's income exceeds the median income in their state and theyhave disposable income to repay some portion of unsecured debt in a chapter 13 repayment plan, then the debtor doesnot qualify for the chapter 7.
2) You want to repay debt
3) you want to save your house from foreclosure
4)you want to stop the repossesion of your car
5) you want to keep nonexempt property
6)you have debts that are non dischargable unde chapter 7.
7) you have a codebtor
Reasons to file for chapter 7
Chapter 7 bankruptcy is appropriate when folowing circumstances apply
1) you are unable to repay ebt in a repayment plan
2)you need quick relief from creditors
3)most debt is dischargeable