The purpose of a bankruptcy discharge is to allow debtors the opportunity to begin with new credit and new debts and repay them timely. A discharge helps a debtor do this because the debtor no longer has to repay discharged debt.
When a debtor files a bankruptcy petition and asks the bankruptcy court to discharge all, or some of the debtor’s debt, the creditors and bankruptcy trustee are given an opportunity to object to debts being discharged. If no one objects, the debtor may receive an automatic discharge. If there is an objection by a creditor, the creditor files a complaint, which is the creditor’s objection, and an adversary proceeding begins.
Ultimately the court will determine whether to discharge any or all debt of the debtor.
Dischargeable and Non-Dischargeable Debts
Some debts are simply not dischargeable under the law. The United States Bankruptcy Code lists debt that is not dischargeable for individuals under section 523(a). Commonly non-discharged debts include:
- tax debts,
- student loan debts with the government,
- alimony or spousal support,
- child support obligations,
- debt incurred fraudulently,
- debts for injury of damage incurred through malicious conduct of the debtor, and
- debts for injury caused by the debtor drinking and driving.
One of the most common forms of dischargeable debt is credit card debt.
A person who considers filing a bankruptcy petition should consider the effects obtaining a discharge will have on any future request for a discharge in bankruptcy.
The court will deny a discharge in a later chapter 7 case if the debtor received a discharge under chapter 7 or chapter 11 in a case filed within eight years before the second petition is filed.
The court will also deny a chapter 7 discharge if the debtor previously received a discharge in a chapter 12 or chapter 13 case filed within six years before the date of the filing of the second case unless
- the debtor paid all “allowed unsecured” claims in the earlier case in full, or
- the debtor made payments under the plan in the earlier case totaling at least 70 percent of the allowed unsecured claims and the debtor’s plan was proposed in good faith and the payments represented the debtor’s best effort.
A debtor is ineligible for discharge under chapter 13 if he or she received a prior discharge in a chapter 7, 11, or 12 case filed four years before the current case or in a chapter 13 case filed two years before the current case.