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No matter what type of bankruptcy you file – personal or business, Chapter 7, 11 or 13 – the ultimate goal is to get a discharge. But exactly what does this mean? Which debts are discharged? What does it mean for debts that aren’t discharged? How do discharges differ between types of bankruptcies? Which debts can’t be discharged? These and other questions are important to ask and be answered so you understand exactly what bankruptcy can and cannot do for you. Check out these seven facts about bankruptcy discharge…
#1 What is Discharge?
Discharge is a permanent release from paying a debt. Once a debt is discharged through bankruptcy it is gone for good! After a discharge, the creditor cannot contact or pursue you or they will face sanctions. Not all debts will be eligible for discharge.
#2 When Is Discharge Granted?
This depends on what type of bankruptcy you filed. For a chapter 7 liquidation of debts, it can be as soon as 60 days after your 341 meeting of creditors which is roughly six months after your initial filing. For a chapter 13, the discharge will be issued promptly after you make your last plan installment payment.
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#3 Is a Discharge Automatic?
Typically, the answer to this is yes. Unless one (or more) of your creditors objects to your bankruptcy and as long as you follow all of the court’s directions and (for chapter 13), you make all your payments, nothing should stand in the way of your discharge.
#4 Which Debts Can Be Discharged?
Nearly all unsecured debt can be automatically discharged with the exception of child support, alimony, tax liens and student loans. The only difference between Chapter 7 and Chapter 13 is that all qualifying debts are automatically forgiven in the former and in the latter, you may have to pay some of your unsecured debts prior to receiving discharge on remaining balances.
#5 Can Your Discharge Be Taken Back?
Under certain circumstances, a discharge could be revoked, but this is rare. If it happens, it’s usually related to accusations of fraud. After a year post-discharge, typically it won’t be revoked. Either a creditor or your Trustee would have to file a request to revoke and the court would hear the evidence before deciding whether or not to revoke. Usually fraud is addressed earlier on in the process and the case will be dismissed.
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#6 Can You Pay a Debt That Was Discharged?
You can certainly opt to pay a debt that was discharged in bankruptcy. You may want to do this if the debt is owed to someone you know, a physician or other professional you want to continue using or because you don’t like the idea of leaving it unpaid. The debt will not be legally enforceable, though.
#7 How Can You Get Student Loans Discharged?
To get student loans relieved, you have to have your bankruptcy lawyer take an extra step. This is called an adversary proceeding and is the only way to request or get partial or total discharge of federal or private student loans. Many people think student loans cannot be forgiven in bankruptcy, but that is not necessarily true.
If you have more questions about bankruptcy discharge or on any bankruptcy topic, contact the law offices of John T Orcutt for a free consultation on your individual debt circumstances and to find out if bankruptcy is a fit for you.