A “discharge” in bankruptcy occurs when the bankruptcy court gives the debtor permission to never repay all or some debts to creditors. When this happens, the debtor is no longer legally required to repay the debts. The creditors of discharged debts are no longer legally permitted to seek repayment of these debts from the debtors.
A debtor may, if he or she wishes, repay debts that have been discharged anyway. This may sound unrealistic, but there are times when a debtor wants to maintain a reputation or relationship with a creditor, despite the discharge. The creditor may be a friend or the creditor may be family.
The Fresh Start
Once there is a discharge and the bankruptcy proceedings conclude, the debtor has an opportunity to begin to rebuild his or her credit by obtaining new credit and repaying debts timely.
Beware of Limitations
Sometimes individuals find themselves again needing the relief that bankruptcy courts can provide. Every person considering filing for bankruptcy, regardless of whether it is the person’s first time filing, should be aware of the limitations on second filings.
A person who is filing for a second time needs to know the limitations on doing so, so that he or she knows whether it will be permissible and when.
A person who is filing bankruptcy for the first time also needs to know about the limitations on second filings because a person filing for bankruptcy for the first time should understand fully the consequences.
Denial of Discharge
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.