Bankruptcy Discharge

A bankruptcy discharge is a court order that eliminates a debtor’s personal legal obligation to pay qualifying debts. It also prohibits creditors from attempting to collect debts that were discharged.

No. A discharge eliminates personal liability for qualifying debts, while dismissal ends the bankruptcy case without granting the requested bankruptcy relief. A discharge also does not necessarily mean that every administrative matter in the case is finished.

Common dischargeable debts may include credit-card balances, medical bills, personal loans, old utility bills, certain judgments and deficiency balances. Whether a particular debt is discharged depends on the facts and applicable bankruptcy law.

No. Bankruptcy law excludes certain categories of debts from discharge. Some debts survive automatically, while others may be declared nondischargeable after a creditor files and successfully proves a case in bankruptcy court.

Some older income-tax debts may qualify for discharge when specific requirements are met. Recent taxes, trust-fund taxes, tax liens and certain other tax obligations generally receive different treatment.

Most student loans are not discharged through the ordinary bankruptcy process. A debtor generally must bring a separate proceeding and establish the legal requirements for discharge.

Domestic support obligations, including child support and alimony, are generally not dischargeable in bankruptcy.

Most criminal fines, penalties and restitution obligations are not discharged in bankruptcy.

Debts for death or personal injury caused by the debtor’s unlawful operation of a motor vehicle, vessel or aircraft while intoxicated are generally not dischargeable.

A discharge may eliminate the debtor’s personal liability, but a valid mortgage or vehicle lien may remain attached to the property unless the lien was avoided, satisfied or otherwise eliminated. The creditor may retain rights against the collateral.

Receiving a discharge does not automatically determine whether property may be kept. Retention depends on exemptions, equity, payment status, the type of bankruptcy, the treatment of secured debt and other case-specific factors.

A reaffirmation agreement is an agreement that may make the debtor personally liable again for a debt that could otherwise be discharged. Reaffirmation agreements must satisfy Bankruptcy Code requirements and should be carefully reviewed before signing.

Yes. A debtor may voluntarily repay a discharged debt. A creditor cannot legally pressure or require the debtor to pay a discharged personal liability.

The discharge injunction is the legal prohibition against attempting to collect a discharged debt as the debtor’s personal liability. It generally replaces the automatic stay for discharged debts after the discharge order is entered.

A creditor generally may not call, write, sue, garnish wages or take other action to collect a debt that was discharged as the debtor’s personal liability.

Keep copies of letters, emails, account statements and call records. Give the creditor a copy of the discharge order and bankruptcy case information, and promptly notify your bankruptcy attorney.

A bankruptcy court may enforce the discharge injunction and impose remedies when a creditor improperly attempts to collect a discharged debt. The available relief depends on the facts and the creditor’s knowledge of the discharge.

Certain debts obtained through fraud, false pretenses, embezzlement, larceny or willful and malicious injury may be declared nondischargeable. A creditor may have to file a timely adversary proceeding and prove the required elements.

The effect of failing to list a creditor depends on the type of case, whether assets were available for distribution, whether the creditor had notice and the nature of the debt. An omitted debt should be reviewed by a bankruptcy attorney.

In a typical Chapter 7 case, discharge may be entered several months after filing, assuming the debtor completes all requirements and no objection or other issue delays the discharge.

A Chapter 13 discharge is generally entered after the debtor completes the required repayment plan, satisfies applicable filing requirements and completes any required financial-management course.

A Chapter 7 discharge may be denied for reasons such as concealing assets, making false statements, destroying records, disobeying court orders or receiving a prior discharge too recently. Denial of discharge can have serious consequences.

A discharge does not automatically remove accurate bankruptcy or account-history information from a credit report. Discharged accounts should generally be reported consistently with the bankruptcy discharge and should not show an improper ongoing personal balance due.

Possibly. Bankruptcy law imposes waiting periods based on the chapter of the prior case, the chapter of the new case and whether a discharge was entered previously.

Ferguson & Ferguson can evaluate which debts may be discharged, explain how secured liens and reaffirmation agreements are treated, prepare a Chapter 7 or Chapter 13 case and review creditor collection activity occurring after discharge. Call the Huntsville office at 256-534-3435 or the Decatur office at 256-350-7200 to discuss your options.