What is The Definition of a Bankruptcy Discharge?
A bankruptcy discharge is an order given by the court after a Chapter 7 or Chapter 13 bankruptcy case. The debtor is released from any responsibility to repay the obligations that have been dismissed by the decree.
Creditors are subsequently barred from pursuing any further collection action against these debts. They can’t contact you, send you letters, or sue you for debts that have been dismissed.
However, any liens connected to secured obligations may still be enforced. Even after the related obligation has been repaid, they may seize and sell property used as collateral for their loans.
What is the Definition of a Bankruptcy Discharge?
A canceled debt vanishes completely. It isn’t worth collecting anymore. It must be written off by the creditor. Credit card debts, medical expenses, litigation judgments, personal loans, obligations under a lease or other contract, and other unsecured debts are all likely to be dismissed in a bankruptcy case.
That may seem to be too good to be true, and there are some disadvantages. Filing for bankruptcy and obtaining a discharge will have a significant negative effect on your credit, therefore you must demonstrate to the court that the discharge is financially essential.
You can’t just request that your debts be discharged because you don’t want to pay them.
What Is a Bankruptcy Discharge and How Does It Work?
All of your creditors will get a copy of the discharge order, as well as the United States Bankruptcy Trustee, the trustee who is directly managing your bankruptcy case, and the trustee’s attorney. This ruling also warns creditors that if they continue to try to collect on the debts, they will face contempt charges.
If a creditor attempts to collect a discharged debt from you, you may submit a petition with the bankruptcy court to have your case reopened. If the court finds that the creditor breached the discharge injunction, the creditor may be punished.
To halt collecting activities, just mail a copy of your order of discharge, and if that doesn’t work, speak to a bankruptcy attorney about taking legal action.
Discharges from Bankruptcy
Individual debtors may apply for bankruptcy under Chapter 7 or Chapter 13. In a Chapter 7 bankruptcy, the trustee will sell your nonexempt assets and distribute the profits to your creditors. Any remaining debt will be forgiven or erased.
If you apply for Chapter 13 bankruptcy protection, you’ll enter into a three- to the five-year payment plan that will settle all or most of your obligations. Any remaining debt will be discharged after your repayment term.
Some debts that cannot be dismissed in a Chapter 7 bankruptcy may be discharged in a Chapter 13 bankruptcy. This includes court costs, some tax-related obligations, condo and homeowners’ association fees, bills for retirement loans, and debts that couldn’t be dismissed in a prior bankruptcy, but not spousal support or alimony.
Discharges under Chapter 7 have certain limitations
The Bankruptcy Code’s Section 523(a) lists the kinds of debts that cannot be dismissed in Chapter 7 cases, including:
- Child support, alimony, and debts due under a marital settlement agreement are examples of domestic responsibilities.
- Fines, penalties, and reparations imposed as a consequence of criminal activity
- Certain taxes, such as fictitious income taxes, property taxes due during the preceding year, and company taxes, are prohibited.
- Expenses in court
- Debts incurred as a result of a DUI conviction
- Fees imposed by a condominium or other homeowners’ association after you filed for bankruptcy
- Loans from a retirement plan
- Debts that have not been dismissed in a prior bankruptcy
- Debts that you didn’t include in your bankruptcy petition
Discharges under Chapter 13 are subject to certain restrictions
- Some debts are not dischargeable in a Chapter 13 bankruptcy, such as:
- Child support and alimony are two types of alimony.
- Fines, penalties, and reparations imposed as a consequence of criminal activity
- Certain taxes, such as false income taxes, property taxes due within the last three years, and company taxes, are prohibited.
- Debts that were not included in your bankruptcy filing
- Debts acquired as a result of a drunk driving-related personal injury or death
- Debts incurred as a result of fraud or recent expensive purchases
Even though discharge is not forbidden by law, creditors may request that certain debts not be dismissed. Debts acquired via deception, any luxuries you charged in the months leading up to your bankruptcy, and debts resulting from intentional and malicious actions such as arson, abduction, vandalism, libel, or slander are all examples of these.
Disadvantages of Filing for Bankruptcy
Joint account holders or cosigners on any of your financial obligations are not covered by your bankruptcy protection. When you get your bankruptcy discharge, your responsibility for the debt is erased, but your cosigner remains liable for the full loan amount.
Cosigners and joint account holders may still be sued by creditors for debts that have been dismissed.
For seven years after you file for Chapter 13 bankruptcy protection, and ten years after you apply for Chapter 7 bankruptcy protection, your bankruptcy discharge will show on your credit record and impact your credit score.
What Is the Average Time It Takes to Get a Bankruptcy Discharge?
A Chapter 7 bankruptcy discharge typically takes four months from the time you submit your bankruptcy petition. In a Chapter 13 bankruptcy, the discharge happens when all of the payments under the repayment plan have been completed, which usually takes three to five years.
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