The purpose of filing a bankruptcy case is to obtain a bankruptcy discharge. Without a bankruptcy discharge, you have wasted your time and your money. A bankruptcy discharge releases you from your personal liability to repay your debts. Once you receive your discharge, you are no longer legally required to repay the debts. You may voluntarily choose to repay one or more of the discharged debts,but a creditor cannot force you to repay the debt.
Furthermore, the bankruptcy discharge prevents creditors from taking any actions in the future to collect the discharged debt. Prohibited actions include sending you letters, calling you on the telephone, making personal contacts, initiating wage garnishments, or pursuing a lawsuit to obtain a judgment against you. If a creditor violates the bankruptcy discharge, the bankruptcy court can sanction the creditor.
When Do You Receive Your Bankruptcy Discharge?
In a Chapter 7 case, you receive the bankruptcy discharge when the court closes your case. Most Chapter 7 cases are closed within four to six months after the filing of the bankruptcy petition. However, before you can receive your bankruptcy discharge, you must complete your debtor education course. A debtor who does not complete the debtor education course will not receive a bankruptcy discharge. In other words, it will be as if he never filed bankruptcy. His creditors can take any legal action they desire to collect the debts owed to them.
A debtor in a Chapter 13 bankruptcy case doesn’t receive a discharge until he completes all payments under the Chapter 13 plan, completes his debtor’s education course, and the Chapter 13 trustee completes and accounting and files the proper reports with the clerk of court. The length of time for the debtor to receive his discharge after he makes his last plan payment depends on how quickly the trustee finishes the accounting and files the reports. Generally, it takes several months for the case to close and the discharge to be issued after making the final plan payment.
Are All Debts Discharged in Bankruptcy?
No, not all debts are dischargeable in a bankruptcy case. Most debts are dischargeable; however, Congress has determined that debtors should not be able to discharge certain types of debts. For any debts that are not discharged, the debtor continues to be legally liable for the debt after he receives his bankruptcy discharge.
Examples of debts that not subject to a bankruptcy discharge include:
- Most taxes, including income taxes
- Most student loans
- Alimony and child support
- Debts that aren’t included in the list of creditors on the bankruptcy forms
- Fines and penalties owed to governmental units
- Damages from a drunk driving accident
- Liens or debts owed to condominium or homeowner’s associations
A creditor may object to the discharge of a specific debt, or the Chapter 7 trustee may object to discharge. The court may deny a discharge for several reasons including failing to provide tax returns to the court, failing to provide personal financial information, hiding assets, failing to provide copies of pay stubs, fraud, and failing to complete the debtor education course. If the trustee or a creditor objects to the discharge, it is up to that person to provide evidence to the court that proves why the court should deny the debtor’s discharge.
What Can a Debtor Do If a Creditor Violates the Discharge?
If a creditor tries to collect a debt that was discharged in bankruptcy, the debtor can file a motion with the court to reopen the case to deal with the creditor’s actions. When a creditor takes any action to collect a discharged debt, the creditor opens itself up to being sanctioned by the court. The sanctions may include damages for the debtor in addition to a court fine.
If you believe a creditor has violated your bankruptcy discharge, seek the help of a trained professional.