What is a bankruptcy discharge?
June 28, 2022
By Diane Drain Attorney & Retired Law Professor
A discharge is an order from the court that says you don’t have to pay your obligations to the creditors listed in your bankruptcy documents as long as the law allows and the court didn’t issue a non-dischargeability order.
The discharge is a legal procedure that relieves you of the majority of your legal obligations to your creditors. Creditors who have been discharged in bankruptcy can no longer pursue you for obligations you accrued before filing bankruptcy. Even after the discharge is issued, there are still debts that remain. Child support, alimony, school loans, most taxes, and a variety of other responsibilities are among these debts. An experienced bankruptcy lawyer can help you figure out which debts are discharged and which aren’t. Video explaining the discharge.
Student loans, child support, alimony/maintenance, government fines or penalties, most taxes, and a few other obligations are not dischargeable under the current legislation.
A permanent federal injunction is what this is called.
A discharge frees debtors from personal obligation for any dischargeable debts, while creditors whose debts are discharged are barred from collecting those debts from the debtors. In chapter 7 cases, companies do not receive discharges; only people do.
After the creditor’s meeting, creditors and the trustee have 60 days to file a complaint stating that they believe there is a good reason why their debt should not be discharged (forgiven) or why this chapter 7 case should not be continued (Bankruptcy Code 523(a)(2), (4), (6, and (15)). In some situations, the Trustee might ask the court to deny a chapter 7 discharge.
The Debtor’s involvement in their case does not end when a discharge is granted.
The Debtor is not excused from executing the obligations imposed by the Bankruptcy Code. The Debtor’s responsibility to submit assets or tax refunds to the Trustee after the discharge is issued is an example of a continuing duty. If the Debtor fails to fulfill these obligations, an action to rescind the discharge may be brought. This means that the Debtor has gone through all of this trouble and now has no protection from creditors garnishing paychecks, filing lawsuits, or seizing bank accounts. Plus all the listed debts may not be discharged in a future bankruptcy.
A creditor with a valid lien on the debtor’s property (such as a house, automobile, furniture, or jewelry) may collect the property or its value even after the discharge.
However, if the debtor owns property that is subject to a judicial lien or a non-purchase—money security interest, the Debtor must bring the matter before the Court for an order removing the lien’s effect. A Motion to Avoid a Lien is the name for this action.
If a debtor wants to keep assets with secured liens (such as a house or automobile), he or she can either make regular payments to the lender or pay the lender a lump-sum payment equal to the item’s fair market value (redemption).
Reaffirmation agreements are not required for home loans in Arizona bankruptcy.
Discuss the issues with your attorney and see if they will sign the agreement so that your payments will appear on your credit reports.
About the Author: Diane Drain
Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.
*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*
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