Bankruptcy 101: Discharge in Bankruptcy

What Does Discharge Mean?

A discharge in bankruptcy releases a debtor from personal liability for certain types of debts. If debt gets discharged, it means that you don’t have to pay it anymore. After a discharge is ordered by the court, creditors are not allowed to contact debtors for collection of unpaid debt because the debtors are no longer legally obligated to pay.

Which Debts Get Discharged in Bankruptcy?

Not all debt is dischargeable. It has to meet certain criteria before bankruptcy can discharge your debt and the timing of when the discharge is granted depends on what bankruptcy chapter is filed. To know what debts are discharged when you declare bankruptcy, consult with us. 

For Chapter 7, you typically receive a discharge around 4 months after the bankruptcy petition is filed. For Chapter 13, discharge is issued after the repayment plan is complete, which takes 3-5 years, depending on your income. 

Debts that are part of a Chapter 7 discharge include unsecured debts, utility bills, medical bills, dishonored checks, certain tax penalties, attorney fees, collection agency accounts, credit card debt, judgments from lawsuits, and any lease contracts a consumer may have.

A revised provision in the bankruptcy code gives temporary relief for those with a Chapter 13 reorganization. In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act allows those who have experienced financial hardship to extend their plan for up to seven years. 

What Can’t Be Discharged?

As mentioned above, debt has to meet certain requirements to be discharged. That means that some kinds of debt are not dischargeable. Below is a list of the more common types. Take note that exemptions for discharge may also depend on the type of bankruptcy filed. To know the specifics about your case, it’s best to consult with a bankruptcy attorney. 

• Alimony
• Child support
• Condo fees
• DUI debt
• Student loans
• Tax debt
• Debt not listed on the bankruptcy 

A secured creditor can still enforce liens to recover property on debts that have not been discharged. 

How Does Discharge Stop Collection?

The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all relevant parties, including the trustee, the debtor, creditors, and the attorneys involved.  

The notice informs creditors that the debts owed to them have been discharged and any further collection attempts may subject them to punishment. 

Even if there is a failure on sending a copy of the discharge order within the time ordered, the discharge is still valid and collection can’t be done on the debts. 

Can Bankruptcy Discharge Be Denied?

A discharge is not always guaranteed. Depending on the type of bankruptcy, the court may deny discharge for different reasons. 

A court can deny a discharge in Chapter 13 if you’ve gotten a prior discharge in another Chapter 13 case within two years before the filing of the second case, or if you don’t complete a course on personal financial management. Discharge can also be revoked for several reasons, like using fraud to obtain a discharge or failure to provide requested documents. 

In Chapter 7, discharge can be denied if you fail to provide tax documents that have been requested, disobey court orders, or conceal relevant documents. A discharge in an earlier case within eight years before the date the second petition was filed can also cause your current discharge petition to be denied. A creditor, the U.S trustee, or the trustee in the case can also object to the discharge.

Challenges after bankruptcy

Bankruptcy harms your credit score and stays on your record for about 7-10 years. This can make it difficult to apply for credit, and the road to rebuilding credit can be tough. A good way to start getting your credit score back up after you file for bankruptcy would be some secured loans and credit cards.

It can also be hard to apply for jobs as employers may not want to hire someone who has filed for bankruptcy. However, an employee cannot be fired for filing bankruptcy.

A bankruptcy attorney can be critical in crafting an effective debt plan. Because the bankruptcy system is so complex, handling a bankruptcy filing on your own can be quite daunting. At Farmer & Wright, PLLC, we focus on our clients’ future and rebuilding their futures. Contact us at 270 387 1414 for a free consultation today.