The bankruptcy discharge is expansive, and applies to all entities. It encompasses all acts to collect or recover a discharged debt as a personal liability.
According to Section 524(a)(2), the discharge in bankruptcy, “operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived.”
This means that all judgments establishing a debtor’s personal liability on a discharged debt are not voidable – they are void. Period. In re Pavelich, 229 B.R. 777, 782 (9th Cir. BAP 1999).
In addition, the debtor does not need to raise a defense in the lawsuit that the debt has been discharged. The defense is absolute, and cannot be waived. Therefore, as the court in Pavelich indicated, a discharged debtor is relieved from a duty to raise the defense in a post-discharge state court proceeding.
Even if a debtor fails to assert the discharge defense in state court, the debtor may nevertheless bring a creditor’s violation of the discharge injunction to the attention of the bankruptcy court.
Therefore, a debtor who is subject to a lawsuit after the discharge of the underlying debt in bankruptcy should know the following:
- the judgment is void by law – even if the debtor has not entered an Answer or other defensive pleading in the lawsuit; and
- the debtor may bring an action against the creditor for contempt of the discharge injunction.