Discharge In Bankruptcy

The bankruptcy process is complex. From the filing of the petition, with all of the necessary schedules (and in a Chapter 13, the plan), to the 341 meeting and the final closing of the case, the most important step for most fliers is the granting of the discharge.

What's a Discharge?

In a bankruptcy case, discharge is the legal term used to describe the ending of the enforceability of your debts. This means you are no longer personally liable for repayment of any debt discharged.

Unsecured vs. Secured

An important element of the discharge is that it is personal. It releases you of responsibility to pay the debt, but it does not erase the debt. This is why secured property that has a lien attached, such as a car or a home, is not yours to keep, free and clear.

The lien is "secured" by the collateral. The holder of the lien can recover the property from you to "satisfy" their lien. Unsecured debt includes items, such as, credit card debt, where there is no lien, so the lender is said to be "unsecured."

Not Every Debt Is Dischargeable

One important fact is not all debts are dischargeable in bankruptcy. The Bankruptcy Code lists 19 types of debts that are not discharged. The most common are some tax claims, student loans, child support and spousal support.

Others include willful or malicious acts, DUI judgments, and types of frauds. Your bankruptcy attorney can explain what types of debts are excluded, and will review your debts to determine which if any are dischargeable.

When is Discharge Granted

The discharge typically occurs automatically at the end of the bankruptcy, or the completion of the plan in a chapter 13. The order of discharge ensures no creditor collection activities may be attempted. If a creditor tries to collect a discharged debt, they are subject to punishment by the bankruptcy court's contempt power.

A discharge can be denied or revoked if it is shown there was any fraudulent behavior by the debtor to obtain the discharge, or if a creditor objects and shows debts were obtained by fraud.

Time Limits on Filing Bankruptcy Cases

You can only file a Chapter 7 case once every eight years and a Chapter 13 every six years. If you file before that time has elapsed, the court will not grant a discharge.