You want to go through bankruptcy to get a discharge. The problem is, you likely have no idea as to what that means.
In the real world, a discharge is grounds for a trip to the doctor.
But in the world of bankruptcy, a discharge is a legal release from personal liability for payment of a debt.
Doesn’t help? OK, how about this:
When the bankruptcy court discharges you from a debt, you don’t have to pay it back. Not now, not ever.
Of course, there’s more to it. Here’s your handy guide to the discharge in bankruptcy.
What Is The Discharge In Bankruptcy?
As with everything online, when defining a term we look to Wikipedia. It’s not always perfect, but this is fairly accurate:
A discharge in United States bankruptcy law, when referring to a debtor’s discharge, is a statutory injunction against the commencement or continuation of an action (or the employment of process, or an act) to collect, recover or offset a debt as a personal liability of the debtor. The discharge is one of the primary benefits afforded by relief under the Bankruptcy Code and is essential to the “fresh start” of debtors following bankruptcy that is a central principle under federal bankruptcy law.
Simply put, the discharge is what prevents a creditor from trying to collect money from you after the bankruptcy is completed.
What Debts Are Discharged In Bankruptcy?
The discharge differs based on the type of bankruptcy case you file.
In a Chapter 7 bankruptcy case, most of your debts are wiped out when the discharge is issued. There are, however, some exceptions such as:
- certain tax debts;
- debts for spousal support (alimony) or child support;
- debts to government agencies for fines and penalties;
- student loans;
- debts for personal injuries incurred as a result of DWI/DUI; and
- court fines and penalties, including criminal restitution.
In a Chapter 13 bankruptcy, some marital debts can be wiped out. In addition, the Chapter 13 Plan allows you to wipe out some second mortgages, catch up on arrears on mortgages and car loans, and pay off tax debts that couldn’t be wiped out in a Chapter 7.
There are some nuances, such as when you file a Chapter 13 bankruptcy and can’t complete the Plan. In that situation you may be able to qualify for a hardship discharge, which differs to some extent from the regular one in a Chapter 13 case.
There are also limits to your ability to get a discharge after a previous bankruptcy case.
- Chapter 7 Bankruptcy Explained
- Chapter 13 Bankruptcy Explained
- Hardship Discharge In Chapter 13 Bankruptcy
- Getting A Discharge After You’ve Been Through Chapter 7 Bankruptcy
When Does The Discharge Get Handed Down?
The discharge is handed down at the end of the bankruptcy case.
For Chapter 7 cases, that’s about 120 days after filing.
In the Chapter 13 situation, discharge occurs when the Plan is completed.
The Form Of The Discharge
The Discharge of Debtor is a one-page document that’s generated by the Clerk of the Court and stamped with the bankruptcy judge’s name or signature. It doesn’t list each debt on your bankruptcy, and looks like a form.
In fact, it is a form.
- How Long It Takes To Complete Chapter 7 Bankruptcy
- Click here to see the Chapter 7 Discharge form.
- Click here to see the Discharge of Debtor After Completion of Chapter 13 Plan
Collections After Discharge
Just because a debt has been discharged doesn’t mean the creditor will follow the law.
In fact, sometimes creditors will sell your debt to another company that will try to collect the debt from you.
That’s illegal under not only the bankruptcy laws but also under other state and federal collection laws.
Protect Your Discharge
For the most part, the discharge is forever.
Though there are some situations in which your discharge can be revoked (that is, taken away) by the bankruptcy court, that’s exceptionally rare. Learn about revocation of your bankruptcy discharge by clicking here.
It’s the most powerful remedy the law provides against creditors and debt collectors. By drawing a line in the sand and forbidding your creditors from crossing it, the discharge gives you peace of mind that lasts forever.