Chapter 13 Bankruptcy “Super Discharge”

The recent case of In re: Andrews, 2015 WL 5813418 (Bankr. E.D. Mich.), reviewed the scope of the chapter 13 bankruptcy discharge. This case involved the dischargeability of an overpayment of unemployment benefits together with the quadruple-damage statutory penalty and interest. In this case, the Michigan Unemployment Insurance Agency filed an adversary proceeding claiming that the entire claim, including the penalty, was nondischargeable.

The Bankruptcy Court found that this claim was not excepted from discharge in chapter 13 bankruptcy. The Court noted that section 1328(a)(2) omits section 523(a)(7) debt [any debt for a penalty payable to and for the benefit of a governmental unit and not in compensation for actual pecuniary loss] from the list of those nondischargeable in chapter 13.The Court reviewed that the scope of the discharge provision in chapter 13 is broader than in chapter 7 and that among the debts dischargeable under chapter 13, but not chapter 7 are penalties payable to and for the benefit of a governmental unit.