Understanding a Bankruptcy Discharge

If you are looking into filing bankruptcy for the first time you may realize quickly that there is some vocabulary tossed around that doesn’t really make sense. One of many legal words is “discharge” and it is a crucial part of filing personal bankruptcy. So what is it and what does it mean for you? Here is some key information to know about a bankruptcy discharge:

1. What is it?

Technically a bankruptcy discharge is a legal order stating that the debtor who has just filed bankruptcy is no longer responsible for paying back certain unsecured debt. The discharge also prohibits any debt collection attempt against the debtor including letters, phone calls or legal action. Put simply, a bankruptcy discharge is the a piece of paper signifying that your bankruptcy has been completed and it was successful.

2. When is it received?

The timeline on when a bankruptcy discharge is received depends on which type of personal bankruptcy is filed. If a Chapter 7 bankruptcy is filed then the discharge is typically received 2-3 months after the debtor’s bankruptcy hearing. If a Chapter 13 bankruptcy is filed then the discharge will not be received until the 3-5 year repayment plan is complete. Under the current bankruptcy code the discharge paperwork is mailed to the debtor via the US Postal Service.

3. Can all debts be discharged?

Receiving your bankruptcy discharge in the mail does not instantly wipe away any and all debts you have. There are certain types of debt that cannot be discharged such as student loans, child support, alimony, and debts owed to the government like back taxes and parking tickets. Before going bankrupt you should have a chance to review what debts you will still be left with after you receive your discharge. If the debt you are struggling with is mainly nondischargeable debt, then filing a Chapter 13 bankruptcy may be your best option.

3. Can it be denied?

The bankruptcy court has the right to revoke any debtors discharge if they find that fraud has taken place within the case. Committing fraud when filing bankruptcy can happen in many different ways. Some common fraud findings are: deliberately omitting information from the bankruptcy paperwork, falsely obtaining a discharge, and not admitting to any additional income expected in the next few years. In most cases hiring a bankruptcy lawyer will help you avoid simple mistakes that the court views as fraud.

A bankruptcy discharge is the light at the end of the bankruptcy tunnel for most debtors. The process of filing for bankruptcy may be difficult and complex at times and in some cases it can take longer than you wanted it to, but in the end the financial fresh start that it provides is absolutely worth the wait. If you are dealing with large amounts of unsecured debt, like credit cards or medical bills, that you cannot see yourself paying off alone then filing bankruptcy may be an option you need to consider.

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