Discharge of Debt
A debtor can obtain a discharge of debt by filing for bankruptcy. A discharge debt releases the individual’s personal liability for many types of unsecured debts. A discharge prevents creditors from making any collections efforts upon the debtor including phone calls, letters, and threats.
Many types of unsecured debt can be discharged, including credit card debt, pay day loans, and medical bills. Howwever, there are other types of debt that cannot be discharged through bankruptcy. Some examples of debts that cannot be discharged are certain tax liabilities, student loans, financial responsibility for any injury caused while driving while intoxicated, child support, alimony, condo and subdivision fees, and debts to governmental agencies. Further, if there are existing liens on property they will not be discharged. The individual is still responsible for anything not discharged by the bankruptcy proceedings.
Discharge varies slightly between Chapter 7 and Chapter 13 filings. In a Chapter 7 Bankruptcy filing creditors are given notice of the proceedings and are given time to object. If no objections are received the debt is generally discharged automatically. The court also has certain requirements and regulations for discharge and may dismiss a case if the requirements are not met in a timely manner. Some of the requirements of the court are that the individual provide tax documents and complete a course on financial management. The court may also dismiss a case without discharge for any type of fraud, concealment, or failure to account for assets. In a Chapter 13 Bankruptcy discharge of debt occurs when the reorganization plan is paid in full. In Chapter 13 filings, like Chapter 11 filings, creditors are given the opportunity to object at the plan confirmation hearing. Creditors may not object to the discharge upon completion of payments under the plan.
It is important to note that in Chapter 7 proceedings the court may revoke a discharge under limited circumstances. The grounds for a revocation closely resemble the grounds of the court to dismiss the case without discharge, including fraud or concealment. In a Chapter 13 filing the court may revoke either confirmation or the discharge of the plan for fraud.
After your debt is discharged is it not legally enforceable and creditors are not legally allowed to attempt to collect a discharged debt. Should a creditor attempt to collect discharged debt a motion can be filed with the court to reopen the case to address tthe creditor. The court may sanction creditors for violating a discharge order.
Though a creditor may not attempt to collect a discharged debt, you may opt to voluntarily pay the amount that was discharged. It is imperative to note that this may only be done after a final order has been issued and the bankruptcy is complete. This most often occurs when the relationship between the parties is of personal importance to the individual, for example, if debts to family or friends were discharged.