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What is Bankruptcy Discharge?

Understanding Bankruptcy Discharge

The term “discharge” is used frequently when referring to bankruptcy, but many filers do not truly understand what is involved and what it means to have their debts discharged through bankruptcy. We hope to clear up some of the misconceptions surrounding this subject and explain what exactly it means to receive a bankruptcy discharge, including both the debtor’s rights, as well as the creditor’s.

What is a Bankruptcy Discharge?

A bankruptcy discharge is the official court order that releases the bankruptcy filer from any personal liability for certain debts. It is essentially a permanent injunction from attempts to collect on a debt. The type of bankruptcy discharge received ultimately hinges on the type of filing made, whether the case be a Chapter 7, 11 or 13 bankruptcy.

The discharge means the debtor is no longer legally required to pay back any debts that are included in the discharge. It is a permanent order that prohibits named creditors from taking any legal action or collection action on the discharge debts. This prohibition also includes communications regarding the debt, including letters and telephone calls from collectors.

While a bankruptcy discharge normally means the debtor is not liable for the debt, if a valid lien exists on the property, that lien will stay with the asset after the bankruptcy case. This means the secured creditor can enforce the lien and recover the property secured by the lien. The debt is secured by the asset, as opposed unsecured debts, including credit card or medical debt.

When Does Discharge Occur?

The timing of the discharge depends heavily on the type of bankruptcy case. In a Chapter 7 bankruptcy, the discharge will be granted soon after the deadline has expired for creditors to file an objection to the discharge and the time for filing a motion to dismiss the case has passed. This is normally 60 days after the 341 meeting, which is normally about four months after the petition for bankruptcy is filed. However, in a Chapter 13 case, the discharge will be normally granted after the debtor completes all payments under the repayment plan.

Are All Debts Discharged?

Not all debts may be discharged, and the rules for discharge are laid out in the Bankruptcy Code. Certain categories of debts cannot be discharged; this means the debtor remains liable for these debts.

These include debts that are a matter of public policy and include:

  • tax claims
  • child support
  • debts for willful and malicious injuries to someone else
  • debts incurred through fraud

Some debts are difficult to discharge, including student loan debt, but they can be discharged if undue hardship is shown on the part of the filer. Creditors can also object to a discharge, by filing a complaint before the deadline set by the court.

Can a Discharge Be Revoked?

A bankruptcy discharge can be revoked if it is discovered that the debtor did any of the following:

  • obtained the discharged through fraud
  • failed to disclose facts that he or she would be entitled to get certain property that would otherwise be a part of the bankruptcy estate
  • committed an act of impropriety under section 727(a)(6) of the Bankruptcy Code
  • failed to provide documents or information that were requested as part of an audit of the case

However, the request to revoke the discharge must be filed within one year of the discharge or before the case is closed.

Can the Debtor Still Pay a Discharged Debt?

After the bankruptcy case is closed, a debtor may still voluntarily repay a debt that was otherwise discharged, even though the debt cannot be legally enforced. However, this action is completely voluntary.

A creditor cannot try to collect on a discharged debt. If that does happen, the debtor is within his or her rights to file a motion with the court to ask that the bankruptcy court address the issue. A creditor who tries to collect on a discharged debt can receive sanctions from the court for violating the discharge injunction.

CONTACT AN ARLINGTON BANKRUPTCY ATTORNEY FOR A FREE CONSULTATION TODAY

An experienced Texas bankruptcy lawyer can help you navigate the bankruptcy system and can help address any concerns you have about the bankruptcy process, especially when it comes to receiving a bankruptcy discharge. Call the Law Office of Marilyn D. Garner NOW at (817) 505-1499 for a free consultation to discuss how bankruptcy may help you.
 

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