Discharge in bankruptcy refers to permission to no longer repay certain debts. Certain debts are “dischargeable” in bankruptcy. Credit card debt is dischargeable. Student loans, tax debt, and court ordered child support obligations are not dischargeable through bankruptcy.
Purpose of a Discharge
The purpose of a discharge is to provide relief from some or all debt in order to give a person or entity the ability to repay other existing and newly acquired debt. It is intended to leave a person with the ability to pay off debts going forward because there are less, or no, existing overdue bills.
What Does a Discharge Do For Me?
Once a person’s debt is discharged, the creditors of that debt are informed that they are not permitted to seek repayment of the discharged debt, whether through telephone calls, letters, or another means.
What Debt Will Be Discharged?
They type and amount of discharge will depend largely upon the type of bankruptcy filed. Chapter 7 bankruptcy is referred to as the liquidation bankruptcy. Chapter 11 bankruptcy is referred to as the reorganization bankruptcy. Chapter 12 bankruptcy is for family farmers and fisherman. Chapter 13 bankruptcy is also called the wage earner’s plan and is best suited for people with a steady income.
Different types of bankruptcy provide better options or results for different debtors. In order to determine which is best for you a close look at each, in addition to your financial circumstances will be necessary.
When is Debt Discharged?
The timing of the discharge varies, depending on the chapter under which the case is filed.
In a chapter 7 (liquidation) case, for example, the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse (60 days following the first date set for the 341 meeting). Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court.
In individual chapter 11 cases, and in cases under chapter 12 (adjustment of debts of a family farmer or fisherman) and 13 (adjustment of debts of an individual with regular income), the court generally grants the discharge as soon as practicable after the debtor completes all payments under the plan. Since a chapter 12 or chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs about four years after the date of filing.
The court may deny an individual debtor’s discharge in a chapter 7 or 13 case if the debtor fails to complete “an instructional course concerning financial management.” The Bankruptcy Code provides limited exceptions to the “financial management” requirement if the U.S. trustee or bankruptcy administrator determines there are inadequate educational programs available, or if the debtor is disabled or incapacitated or on active military duty in a combat zone.