A discharge in bankruptcy is permission from the bankruptcy court to the debtor to not repay those debts that are discharged. A discharge also informs creditors they may not attempt to collect those debts.
Not all debts are dischargeable. Most determinations not to allow the discharge of a debt stem from public policy concerns.
The most common types of non-dischargeable debt include government student loans or benefit overpayments, tax debts, court-ordered spousal or child support, fines or tickets the debtor has received from a government agency, debts due to personal injury caused by the debtor while driving under the influence or maliciously, and debts about which the debtor failed to inform the bankruptcy court in the schedules the debtor filed in court.
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.
Creditors’ Objections to the Automatic Discharge
Creditors do, however, have an opportunity to object to debts being discharged prior to their discharge. After a case is filed creditors receive a lot of relevant information about the case. Part of that information will be information about filing an objection if the creditor wishes. There will be time limits, or a deadline, placed on the creditor’s opportunity to object. Creditors are not permitted to decide not to object and challenge the discharge later when things haven’t gone in the creditor’s favor.
The United States trustee and the bankruptcy trustee may also file objections to the discharge of debts.