Bankruptcy is a term that makes many people uneasy, but it can be a fresh start for those who need it. At the end of the bankruptcy process, a bankruptcy discharge is ordered by the court. This order is created to relieve the individual of any obligation to repay the debts that fall under the discharge.
Once the bankruptcy discharge has been issued, creditors are no longer allowed to take any further actions to collect the debts the debtor owes them. This includes no longer being able to call, send letters or emails, or sue over the debts. However, if you had placed any collateral against the loan, the collectors may still repossess and sell these properties. Alison Grant, Attorney-at-Law, understands that a bankruptcy discharge can be a bit confusing. This is why she and her team have created this guide to help you feel more comfortable at the end of your bankruptcy case.
What Is a Bankruptcy Discharge?
Any debt that falls under the bankruptcy discharge ordered by the court completely goes away. Debts that are most likely to be discharged by the court include:
- Credit Card Debt
- Personal Loans
- Medical Bills
- Lawsuit Judgments
- Unsecured Debts
While this may seem like a prime opportunity to relieve yourself of debt, it does have its drawbacks. Filing for bankruptcy should be used only as a last resort to give yourself a fresh start concerning your finances. For example, your credit will be seriously impacted which will make it more difficult for you to be approved for loans in the future. For a bankruptcy discharge to be issued by the court, you must be able to prove or establish that a discharge is necessary for you to rebuild your financial health.
To receive a bankruptcy discharge, you must complete and comply with all requirements of your bankruptcy case as given to you by the court. If you fail to meet these requirements, the court can deny your discharge.
How Does the Bankruptcy Discharge Work?
When a bankruptcy discharge is issued by the court, a copy will be mailed to all the creditors listed on the discharge as well as the U.S. Bankruptcy Trustee. A copy will also be given to the trustee who is in charge of handling your case as well as the trustee’s attorney. The order will include notice and instructions for the creditors, as they will no longer be able to take further action to collect the debt you owe them. If they fail to heed the notice or refuse to abide by the court-ordered discharge, they will face consequences from the court.
It is important that you keep your copy of the discharge notice alongside your other bankruptcy paperwork. Should a creditor or other party dispute the discharge, you can use these in court as evidence that they are legally required to write your debt off.
If a creditor continues to press you about a debt, you can file to the bankruptcy court to have your case reopened. The creditor will then be required to present themselves to court to receive any punishment, such as fines, for refusing to abide by the court-ordered discharge. Having a competent bankruptcy attorney on your side can help you figure out which legal direction to take if a creditor ignores the discharge.
Types of Bankruptcy Discharge
When an individual files for bankruptcy, they can either file for Chapter 7 or Chapter 13 bankruptcy protection.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy involves a trustee liquidating your nonexempt assets and then dividing them up among the creditors. Any debt that remains after this process will be discharged or completely erased. Somedebts are not permitted to be discharged under the Chapter 7 discharge proceeding. These debts include:
- Child support
- Debts owed under a marriage settlement agreement
- Certain fines or restitution resulting from criminal activities
- Fraudulent income taxes
- Property taxes (that were due within the previous year)
- Business taxes
- Court costs
- Debts tied with DUI violations
- Homeowners’ association fees
- Retirement plan loans
- Debts you failed to list on your bankruptcy petition
Chapter 13 Bankruptcy
In Chapter 13 bankruptcy, the debtor will enter a payment plan period of three to five years, with the goal of paying most of the debt. Any debt that remains at the end of this period will then get discharged or erased. Chapter 13 allows for certain debts to be discharged that do not fall under Chapter 7. This includes the following:
- Marital debts from a divorce agreement (this does not include spousal support or alimony)
- Court fees
- Certain tax-related debts
- Homeowners’ association fees
- Debts for retirement loans
Chapter 13 Bankruptcy Discharges cannot clear debts due to the following:
- Child Support
- Fraudulent income taxes
- Property taxes that were due from the previous year
- Debts not listed on a bankruptcy petition
- Debts incurred from an injury or death due to drunk driving
- Debts coming from fraud or luxury purposes
How Long Does It Take to Get a Bankruptcy Discharge?
The length of time it takes for a bankruptcy discharge to be issued depends on what type of bankruptcy is filed. A Chapter 7 bankruptcy case can take about four months after your petition has been filed. For Chapter 13, the discharge will occur after the repayment period has come to an end, which is generally between three to five years.
A Bankruptcy Attorney You Can Trust
Alison Grant, Attorney at Law has been helping the individuals of Lewisville, TX with their bankruptcy cases since 1998. She brings her extensive experience, considerable knowledge, and strong spirit of compassion to every case she takes on. Alison Grant isn’t just an attorney; she is a personal advocate for her clients, ensuring that above all else, they are taken care of. Contact her team today if you have any questions or to schedule a consultation.