A Bankruptcy Discharge is your Goal, from the first second that you enter the bankruptcy process
The bankruptcy discharge is only gained after a person has filed for bankruptcy and completed the appropriate stages of bankruptcy. The stages vary somewhat depending on any assets the debtor or debtors hold. The period of bankruptcy varies, but allows a fresh start for the debtor, once the terms of bankruptcy have been completed.
The bankruptcy discharge releases the debtor from the payment of certain debts which have been specified during the bankruptcy, and are discharged by the bankruptcy court.
First we explain the key concepts behind “Bankruptcy Discharge”, then answer a number of questions including:
Q: What Are the Penalties If Bankruptcy Is Not Discharged?
Q: Are all of the debtor’s debts discharged, or only some?
Q: What Is the Definition of a Discharged Bankruptcy?
Q: Are bankruptcy discharge and dismissal the same thing?
Q: Can child support interest and penalties be discharged in bankruptcy?
Main Discussion of Bankruptcy Discharge
The discharge from bankruptcy is a permanent order, which means that the creditors are not allowed to try to collect on these debts, or take any form of legal action after the bankruptcy discharge. This then frees up the debtor to make a fresh financial start, free from these previous debts, and without phone calls, letters, or any personal contact from the previous creditors.
However, it should be noted that any liens placed on property that are not discharged, are still in effect and are enforceable after the bankruptcy. There are other types of debt that cannot be discharged, such as tax debts, debt for certain types of housing such as condominiums, and debts such as spousal support payments if these are not listed during bankruptcy procedures as debts owing.
If the debtor has been given a repayment plan under the bankruptcy plan, then usually once these repayments have been made, then the court usually grants the discharge, but of course, the laws concerning bankruptcy are complicated, and you should get more details from your financial adviser.
There is no guarantee of an automatic bankruptcy discharge for any debtor, as the creditors are entitled to file a complaint in the bankruptcy court, provided it is filed before the deadline is reached for this.
Also the bankruptcy court itself may not grant a discharge, for a variety of reasons. The debtor has to fulfill various requirements during bankruptcy, such as filing tax returns, making payments to creditors according to the agreement, and attend a personal financial management course. If any of these are not completed to the satisfaction of the courts, then the debtor cannot be discharged until these have been completed to the satisfaction of the bankruptcy court.
The bankruptcy discharge can be revoked by the court within one year of it being granted, if it is found that the debtor has filed fraudulent claims, or has obtained the discharge by fraud.
Once the debtor has been discharged from bankruptcy, those debts that were discharged no longer have to be paid. However, in some circumstances, the debtor may choose to pay back any debts even though the debts have been discharged. In the case of debts to a family doctor for instance, or to a family member, the debtor may choose to make payments even after they have been discharged from these payments. That is the debtors decision, and they are not obliged to make payments to any creditors from which they have been discharged.
It should be remembered that although bankruptcy provides a fresh start for someone who has accumulated debts which they cannot pay, and the period before becoming discharged does vary, the aim of bankruptcy is to enable the debtor to become a valuable member of society by forgiving debts that they have incurred, thus removing the tremendous financial burdens many carry.
~~ Common Questions about Bankruptcy Discharge ~~
Q: What Are the Penalties If Bankruptcy Is Not Discharged?
Once you have filed a petition for bankruptcy protection, your creditors are not allowed to contact you any more by mail, email, phone or any other approach. And once your bankruptcy process has been completed, all debts covered by the filing are discharged, meaning that creditors must continue to comply with the conditions of the bankruptcy by not contacting you for any further collection activity.
So, if your debts are not discharged, if a discharge of debtors notice is not granted to a consumer concerning a certain debt, the creditor has the right to continue with collection activities; since the conditions of the bankruptcy no longer apply, your creditors can act to pursue certain remedies that are related to your debt.
If there’s no discharge of debtors notice executed, it’s exactly as if a debtor had never filed a petition for bankruptcy at all. Creditors can pursue legal action through the courts and acquire a judgment; and once they have obtained a judgement, they have numerous options available to them, including garnishing wages or attaching a bank account. And in some states, a creditor can attach a lien to real estate property.
Q: Are all of the debtor’s debts discharged, or only some?
Not all debts are discharged. The Bankruptcy Code lists the types of debts not eligible for discharge under 11 U.S.C. §523. The debts discharged vary under each chapter of the Bankruptcy Code.
Student Loans are typically not dischargeable, although this is not so if it can be proved that there are issues of undue hardship from a failure to have the debt discharged.
Domestic support obligations are typically not dischargeable – although issues of accrued interest and state-collected penalties may be, in some circumstances (so, the debtor should prepare for increased legal fees; see later).
Some taxes are not dischargeable – according to 11 U.S.C. §507, taxes due within three years of the bankruptcy filing and that were assessed by the IRS less than 240 days before the bankruptcy started will not be discharged. Taxes that were filed within two years of filing for bankruptcy are also not dischargeable. Also, financial penalties imposed on tax debtors due to fraud or willful evasion of taxes are not eligible for discharge.
And, money, assets, or credit obtained through fraudulent means are not dischargeable.
It’s also important to realize that when you file for personal bankruptcy, the filing will only cover pre-bankruptcy petition debts. This is true of both Chapter 7 and Chapter 13 bankruptcies. Both types cover pre-petition bankruptcy debt, but only some types of post-petition debt can be added to a bankruptcy plan.
Q: What Is the Definition of a Discharged Bankruptcy?
Discharged bankruptcy is a legal term for a permanent court order releasing the debtor from personal liability for the debts covered by the bankruptcy petition. The order prohibits creditors from starting or continuing collection action on any discharged debts, and continues the prohibition against legal action or communication with the debtor in the form of telephone calls, emails, letters, or personal contacts.
This order, in general, releases the bankrupt from all current debts associated with the petition for bankruptcy (wipes clean the financial slate) and frees the debtor from the legal disabilities of a bankrupt.
To move away from legal-speak: a bankruptcy discharge can be seen as a new beginning in a debtor’s financial life because when a debtor obtain the formal discharge, the financial slate is wiped clean, and they are are free from the debt associated with the bankruptcy plan.
Q: Are bankruptcy discharge and dismissal the same thing?
Bankruptcy dismissal and discharge are two different things. A bankruptcy can be dismissed for various reasons such as abuse or failure to live up to a bankruptcy plan.This leaves the debtor without a bankruptcy discharge – which is the ultimate target of any debtor filing for bankruptcy.
A discharge (see the question above) is the elimination of debts, which occurs at different times depending on what chapter under which the bankruptcy was filed.
Q: Can child support interest and penalties be discharged in bankruptcy?
Child support itself is not dischargeable.
However, the accrued interest and state collected penalties MAY be dischargeable. This will typically call for a debtor’s bankruptcy lawyer to file an adversary action (lawsuit) in Federal bankruptcy court to get them discharged, so additional legal costs are likely, above any fees charged by the bankruptcy attorney for filing the bankruptcy itself.
This would be a good issue to address when interviewing local bankruptcy attorneys prior to commencing the petition for bankruptcy.
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