What is meant by discharge in a Chapter 7 Bankruptcy?
I am asked this question by my readers very often. Most of the questions are relating to Chapter 7 and my clients major concerns are what can be discharged via Chapter 7 bankruptcy and what exactly is meant by discharge. In this column, I like to detail on this matter and explain in rather more detail what a discharge means and how one can get the best result from filing of a bankruptcy.
The court order grants a discharge to the person named in the debtor. It is not a dismissal of the case and it does not decide how much money the trustee will pay to the creditors.
Collection of discharged debts prohibited.
The bankruptcy discharge prohibits any attempts to collect from the debtor a debt that has been discharged. For example a creditor is not permitted to contact a debtor by mail, phone, or otherwise, to file or continue a lawsuits, to attach wages or other property, or to take any other action to collect a discharged debt from the debtor. There are also special rules that protect certain community property owned by the debtor’s spouse, even if that spouse did not file a bankruptcy case. A creditor who violates this order can be required to pay damages and attorney’s fees to the debtor. However, a creditors may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtor’s property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case. Also, a debtor may voluntarily pay any debt that has been discharged.
Debts that are discharged.
The Chapter 7 discharge order eliminates a debtor’s legal obligation to pay a debt that is discharged. Most, but not all, types of debts are discharged if the debt existed on the date the bankruptcy case was filed. If this case was begun under a different chapter of the Bankruptcy Code and converted to chapter 7, the discharge applies to debts owed when the bankruptcy case was converted.
What Debts cannot be discharged?
Some of the common types of debts which are not discharged in a chapter 7 bankruptcy case are:
– Debts for most taxes
– Debts incurred to pay nondischargeable taxes
– debts that are domestic support obligation.
– Debts for most student loans
– Debts for most fines, penalties, forfeitures, or criminal restitution obligations.
– Debts for person injuries or death caused by the debtor’s operation of a mot vehicle, vessel, or aircraft while intoxicated.
Some debts which were not properly listed by the debtor
Debts that the bankruptcy court specifically has decided or will decide in this bankruptcy case are not discharged.
Debts for which the debtor has given up the discharge protections by signing a reaffirmation agreement in compliance with the Bankruptcy Code requirements for reaffirmation of debts; and
– Debts owed to certain pension, profit sharing, stock bonus, other retirement plans, or to the Thrift Savings Plan for federal employees for certain types of loans from these plans.
– This information is only general summary of the bankruptcy discharge. There are exceptions to these general rules. Because the law is complicated, you may want to consult an attorney to determine the exact effect of the discharge in this case.