What is Debt Discharge and When is it Automatic?

A discharge is essentially an order from the bankruptcy court informing a debtor and the debtor’s creditors that the debtor is no longer legally required to repay the debt. The debtor is no longer legally responsible for the debt.

Many common types of non-dischargeable debt include tax debt, debts the debtor did not list for the court, spousal support and child support, debts for malicious actions, fines or penalties from the government, debts for most government student loans or benefit overpayments, and debts created by driving under the influence.

The Automatic Discharge When There is No Objection

Unless there is litigation involving objections to the discharge, the debtor will usually automatically receive a discharge.

The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the U.S. trustee, the trustee in the case, and the trustee’s attorney, if any. The debtor and the debtor’s attorney also receive copies of the discharge order.

The notice, which is simply a copy of the final order of discharge, is not specific as to those debts determined by the court to be non-dischargeable, i.e., not covered by the discharge. The notice informs creditors generally that the debts owed to them have been discharged and that they should not attempt any further collection. They are cautioned in the notice that continuing collection efforts could subject them to punishment for contempt. Any inadvertent failure on the part of the clerk to send the debtor or any creditor a copy of the discharge order promptly within the time required by the rules does not affect the validity of the order granting the discharge.

When Discharge is Not Automatic

While creditors are not permitted to seek repayment of a discharged debt through any avenue of communication, whether by mail, telephone, or any other communication, a creditor does have an opportunity to object to a debt being discharged prior to its discharge. After the discharge order, however, the creditor must comply with the court’s notice and warning of the discharge.

After the filing of the case, creditors will receive a lot of important information. This important information will include the deadline for filing any objections to discharge of debt in the case. Any creditor who wishes to object must file a complaint in the bankruptcy court before the deadline passes. Filing this objection turns the bankruptcy into an adversary proceeding.

Creditors are not the only people or entities entitled to file an objection to discharge within the applicable time period allowed. A bankruptcy trustee may also file such an objection. The United States trustee may file an objection to the discharge of a debt or debts as well.

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