by John M. Roberts
In a bankruptcy filing, what does a discharge mean?
- A bankruptcy discharge is a ruling made by the courts that blocks creditors from attempting to collect on certain debts that are listed in the bankruptcy petition.
What happens when a bankruptcy is discharged?
- When a bankruptcy is discharged, certain debts are released and the debtor is no longer held liable for paying them.
- The discharge is ordered by the court and is a legal statute that prohibits creditors and debt collectors from trying to make further efforts to collect on the debt by any means.
- A discharge includes a stoppage of any form of communication, personal contact, or legal action to solicit payments from the debtor by the creditor.
Does a discharge apply to all debt filed in the petition?
- Most debts are usually discharged in a bankruptcy filing but not all.
- If a debt is not discharged, the debtor is still obligated to make payments after the bankruptcy has been discharged.
What are the most common debts that are not discharged?
- Certain liens that are placed on property to secure a debt and made unenforceable will remain on the property and may be enforced to recover the property if it becomes necessary by the creditor.
- Delinquent taxes.
- Child support.
- Spousal support.
- Government school loans.
- Debts that are not set forth in the bankruptcy petition by the debtor cannot be discharged.
- Court ordered awards against a debtor for injuries to people and/or destruction of property may not be discharged.
- Penalties and fines set forth by city, state, or federal agencies will not be readily discharged.
- Any type of government benefit overpayment.
- Overpayment from certain tax-advantaged retirement plans.
- Debt arising from property settlement from a divorce.
Are all discharges the same and how soon do they occur after filing a bankruptcy petition?
- The timeframe for a discharge depends on the type of bankruptcy filed, i.e. Chapter 7, 9, 11, 12, 13, etc.
- Each Chapter has rules and regulations that apply to their specific standards and therefore, there are variations in the way debts are discharged under each.
What must take place to have debts discharged in bankruptcy?
- The Federal Rules of Bankruptcy Procedure dictates that the clerk of the bankruptcy court mail copies of the order to all parties involved, including the debtors, creditors, the court appointed trustee, attorneys, etc.
- If there is no litigation involving objections, the debtor usually receives a discharge automatically.
What are the consequences for creditors who violate the discharge order?
- When the discharge order is sent out, it informs creditors that the debt owed to them has been discharged.
- The discharge order cautions against continuing their collection efforts.
- It is spelled out in no uncertain terms that any further collection attempts is subject to punishment under bankruptcy laws.
Can a creditor object to a bankruptcy discharge?
- In certain situations, a creditor can object to a discharge and debtors don't always have an absolute right to have their debts discharged.
- To object to a discharge, a creditor must file a complaint in the bankruptcy court.
- The filing of an objection is referred to as an "adversary proceeding."
- An objection must be filed before the deadline set out in the notice.