What Is A Bankruptcy Discharge & How Does It Work?
The main reason you may need to file for bankruptcy is to discharge certain types of debts so that you can have a fresh new start on your finances.
Being discharged from your debts gives you some breathing room. It enables you to be rid of your obligations to creditors. If you recently filed for bankruptcy, it’s important for you to know what exactly it means to have a bankruptcy discharged.
We’ll teach you the simple, broad definition and then move into more niche topics beneath it, to make sure everything’s covered. Let’s get started.
What Is A Bankruptcy Discharge?
A bankruptcy discharge is a ruling issued by the bankruptcy court that releases the debtor from his or her liabilities on certain types of debts.
Once you get a bankruptcy discharge, you are no longer required to pay the debts that were discharged in the bankruptcy. It is a permanent order that prohibits your creditors from taking any actions to collect the discharged debts. These include legal actions and all forms of communication with the discharged debtor.
Although you are no longer required to pay for discharged debts, secured liens on your property will still be there, even after your bankruptcy case. The most common cases for this would be car and home loans – these are still owed if you want to keep that property.
When Does Bankruptcy Discharge Happen?
The timing of a discharge in a bankruptcy case depends on the chapter you file. If you filed for Chapter 7 bankruptcy, the court generally grants you a discharge three to six months after the date you filed the petition to the bankruptcy court.
Under Chapter 13 bankruptcy, the court can grant the bankruptcy discharge papers as soon as you complete the payments under the plan. This usually occurs three to five years after the date of filing.
But filing a petition for a bankruptcy discharge does not guarantee that you will be awarded one. The court can deny you, especially if there are anomalies present, as described in the Bankruptcy Code. These include failure to provide necessary tax documents, concealment of property, failure to complete personal financial management courses prescribed by the court, fraudulent acts, and failure to account for the loss of assets.
What Does Getting A Bankruptcy Discharge Mean?
Unless there is litigation in response to the discharge, you will immediately receive the bankruptcy discharge.
Under the Federal Rules of Bankruptcy Procedure, you will be sent a copy of the order. All of your creditors and your attorney will receive one too. The paper is a simple notification to inform creditors that the debts owed to them have been discharged and that they should not attempt to collect the discharged debts from you any longer.
If they ignore the notification, they may be subject to punishment for contempt. However, It is important to note that not all debts are discharged in bankruptcy.
Under Chapter 7 Bankruptcy, there are debts that debtors still need to repay even within bankruptcy. These non-dischargeable debts include child support, alimony, student loans, secured debts on property (if kept) and other tax debts.
Debts that arise out of fraud and malice are not discharged in bankruptcy. Debts that are not identified by the debtor while filing for the bankruptcy petition are also considered non-dischargeable.
A Chapter 13 case also has its own category of debts that can not be discharged. Like Chapter 7, include debts from child support, alimony, student loans, secured debts on property (which can generally be paid through the Chapter 13 plan) and other tax debts.
If you file for Chapter 13 bankruptcy, you will only get discharged after completing the three to five-year payment plan set by the court and abiding by all court required requests including providing tax returns and cooperating with any court proceedings.
Can Creditors Object To A Bankruptcy Discharge?
Creditors obviously want to get their money back, so is there a way for them to object to a bankruptcy discharge?
In Chapter 7, creditors are allowed to object to a debtor’s discharge. Once they receive notice of the bankruptcy, they can file a complaint against a bankruptcy discharge, which is called an “adversary proceeding.” This is very rare and mainly happens only in cases with a large amount of asset value at stake.
On the other hand, creditors do not have any right to object to the discharge under Chapter 13 bankruptcy. They can only object to the repayment plan. However, this happens very rarely in a case set up by a qualified bankruptcy attorney.
Can A Bankruptcy Discharge Be Revoked?
Being granted with a bankruptcy discharge does not mean that you are no longer liable to pay off your debts. The court can still revoke the discharge under some rare circumstances.
For instance, the creditor or the US trustee can still request the bankruptcy court to revoke the discharge, especially if anomalies were proven to be present during the proceeding.
Examples of these are fraudulent activities, misstatements discovered during the audit or failure to provide necessary documents. As a general rule, the request to revoke the bankruptcy discharge should be filed within the year that the discharge was granted. Failure to do so will prevent the creditors from filing for revocation in the future.
What If You Lose Your Bankruptcy Discharge Papers?
Your bankruptcy discharge papers serve as your protection against your creditors who might harass you into paying off your discharged debts.
If you happen to lose your copy of your discharge documents, you can get a copy of the discharge papers by communicating with the clerk of the bankruptcy court where the petition was granted. There is a fee when obtaining discharge papers. It covers locating them within the court records and printing of certified copies.
Hire A Bankruptcy Lawyer To Help
Seeking help from a reliable bankruptcy lawyer will not only help you understand the complex processes around getting a discharge, but having one will also help you get through all aspects of your bankruptcy confidently.
Here at Leinart Law Firm, we can help you file for bankruptcy and discharge your debts. We will review your case and recommend the best path forward. We will also educate you on your rights and obligations so that you will be fully protected throughout the bankruptcy process.
You don’t need to face bankruptcy alone. Let us help you so that you may find peace despite the financial pressure you’re feeling.