What is a bankruptcy discharge?
Generally, by filing bankruptcy a debtor is seeking a discharge of debts. A discharge means that certain debts become unenforceable against the debtor personally. Creditors whose claims against the debtor are discharged may never take action against the debtor to collect the discharged debts. If a creditor believes that the debtor should not receive any discharge of debts under Sec. 727 of the Bankruptcy Code or that a debt owed to the creditor is not dischargeable under Sec. 523(a)(2), (4), (6), or (15) of the Bankruptcy Code, timely action must be taken in the bankruptcy court by the deadline set forth in the Order for Meeting of Creditors.
EXPLANATION OF BANKRUPTCY DISCHARGE IN A CHAPTER 7 CASE This court order grants a discharge to the debtor. It is not a dismissal of the case and it does not determine how much money, if any, the trustee will pay to creditors. Collection of Discharged Debts Prohibited: The discharge prohibits any attempt to collect from the debtor a debt that has been discharged. For example, a creditor is not permitted to contact a debtor by mail, phone, or otherwise, to file or continue a lawsuit, to attach wages or other property, or to take any other action to collect a discharged debt from the debtor. A creditor who violates this order can be required to pay damages and attorney ‘s fees to the debtor. However, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtor’s property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case. Also, a debtor may voluntarily pay any debt that has been discharged. Debts Th
This is an Order from the Bankruptcy Court granted upon the completion of a bankruptcy case, providing that certain debts have been legally wiped out – the debtor is not responsible for payment of those debts, and the creditors may not attempt to collect those debts by any means. The debtor remains responsible for continuing payments on secured obligations with remaining debt, such as mortgages and car payments, and the creditors may seek foreclosure or repossession if those debts are not paid. However, in that event, the creditor may not follow the debtor for any deficiency after the collateral is taken. The debtor also remains responsible for payment of any debt that is determined to be nondischargeable.
The bankruptcy discharge eliminates the debtor’s personal liability on loans including, but not limited to, credit cards, personal loans, and business loans. This means that the creditor can no longer use the legal process to garnish wages or bank accounts. A creditor can still repossess or foreclose on secured property after the bankruptcy, but the debtor will not have personal liability for the debt. Oftentimes in order to keep secured property after the bankruptcy a debtor will have to sign a reaffirmation agreement with the creditor to keep the property.
