A bankruptcy discharge is an order that wipes out qualifying debt, such as credit card balances, utility bills, and medical debt. You’ll receive it toward the end of your Chapter 7 or Chapter 13 bankruptcy, and for most bankruptcy filers, the bankruptcy discharge is the most important part of a bankruptcy case. Once entered, the filer is no longer responsible for the discharged debt. A creditor can’t call, send demand letters, report nonpayment of the debt to credit reporting agencies, file a lawsuit, or take other actions to collect the discharged debt. When To Expect the Bankruptcy DischargeIf your bankruptcy chapter proceeds as planned; you satisfied all requirements and no one successfully objects to your filing—you’ll receive the discharge at the end of your matter after you’ve done the following: Will the Discharge Order List Discharged Debts?No—and many find this fact surprising. Instead of listing the wiped-out debts, the order will provide general information about debt categories that don’t go away in bankruptcy or “nondischargeable debt.” For instance, it will explain that you’ll likely remain responsible for paying: Liens Remain on PropertyAlthough a discharge relieves you of your responsibility to pay a debt, it won’t get rid of a lien that a creditor might have on your property. A lien allows the creditor to repossess and sell the collateral to recover at least some of the money you borrowed if the debt remains unpaid even if the court discharged the debt in your bankruptcy case. Some liens can be removed, however, even after the closure of the bankruptcy case. A local bankruptcy lawyer will be able to advise you about your options. After the court issues the discharge, creditors holding nondischargeable debts can continue collection efforts. Although the order doesn’t provide the clarity that many debtors desire, it might be helpful to understand that creditors are expected to know whether a particular debt is dischargeable. Protections exist, too. A creditor that attempts to collect a discharged debt wrongfully is subject to paying for any resulting losses. The Court Can Deny or Revoke a DischargeIf you fail to cooperate with the court or the trustee, are not truthful on the paperwork or in your testimony, fail to turn over assets, or are otherwise undeserving of a discharge, the court can deny your discharge. Likewise, if the court learns that you committed some act that would have caused the court to deny your discharge, the court can revoke it. Keep Your Discharge Order after BankruptcyIt’s not a bad idea to keep your discharge paperwork somewhere you can easily find it because you might need it in the future. For instance, a lender might ask for a copy if you apply for credit or a home mortgage. Also, you’ll want to be able to provide the following to any creditor that calls to collect a discharged balance: Types of Bankruptcy DischargesIndividual debtors can file for Chapter 7 or Chapter 13 bankruptcy protection. The trustee will liquidate your nonexempt assets and divide the proceeds among your creditors in a Chapter 7 bankruptcy. Any debt that remains will be discharged or erased. You’ll enter into a payment plan over three to five years that repays all or most of your debts if you file for Chapter 13 protection. Any debt that remains at the end of your repayment plan will be discharged. A Chapter 13 bankruptcy allows some debts to be discharged that can’t be discharged in Chapter 7 proceedings. This includes marital debts created in a divorce agreement, although not spousal support or alimony, as well as court fees, certain tax-related debts, condo and homeowners’ association fees, debts for retirement loans, and debts that couldn’t be discharged in a previous bankruptcy. Limitations of Chapter 7 DischargesSection 523(a) of the Bankruptcy Code describes the types of debt that can’t be discharged in Chapter 7 proceedings, including: Limitations of Chapter 13 DischargesSome debts can’t be discharged under Chapter 13 bankruptcy, including: Disadvantages of a Bankruptcy DischargeYour bankruptcy protection doesn’t extend to joint account holders or cosigners on any of your debt obligations. Your personal liability for the debt is removed when you receive your bankruptcy discharge, but your cosigner remains on the hook for the entire balance of the debt. Creditors can still collect from or even sue—cosigners and joint account holders for discharged debts. Your bankruptcy discharge will additional appear on your credit report and affect your credit score for seven years after you file for Chapter 13 protection, and for 10 years from the date you file for Chapter 7 bankruptcy. How Long Does It Take to Get a Bankruptcy Discharge?Discharge for a Chapter 7 bankruptcy usually occurs about four months after the date you file your bankruptcy petition.14 The discharge occurs after all the payments under the repayment plan have been made in a Chapter 13 bankruptcy, typically three to five years Ways to Object to a Bankruptcy DischargeA bankruptcy discharge cancels your obligation to pay back qualifying debts after your bankruptcy case ends. Creditors cannot legally collect a discharged debt from you. If you’d like to dispute the debtor’s right to a discharge, you’ll need to file either an adversary proceeding (a type of lawsuit) or a motion, depending on the type of debt involved. Types of Objections Raised in an Adversary ProceedingA creditor will usually object to the discharge of its particular debt when fraud or an intentional wrongful act occurs before the bankruptcy case. For instance, examples of nondischargeable debts, if proven, could include: What Debts are Not Qualified to be Discharged in Bankruptcy?There are some debts that are not eligible to be discharged in a bankruptcy case. According to the Bankruptcy Code, some types of debt that may not qualify to be discharged include: Free Initial Consultation with LawyerIt’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
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