Q: How is a “discharge in bankruptcy” defined?
A: Discharge in bankruptcy releases the debtor from paying personal liabilities on specific types of debts which means that the debtor does not have to pay any debts as everything will be discharged. The discharge is often permanent to prohibit the creditors from taking any collection on the debtors.
Moreover, the creditor is also prohibited from making any communication with the debtor which includes telephone calls, letter and even personal contacts. Even though the debtor is not saved from any valid lien thus the secured creditor may also enforce the lien to recover the property that was secured.
Q: When can the discharge happen?
A: Discharge can happen depending on the type of bankruptcy proceeding that was filed. If a debtor files for Chapter 7, then the court usually grants the discharge immediately of the time of filing and this takes about 60 days following after the first meeting with the creditors. The discharge usually takes in effect about four months after the debtor files the petition to the court.
On the other hand, for Chapters 11, 12 and 13, the court usually grants the discharge as soon as the debtor completes the payment under the new repayment plan. Normally, Chapters 12 and 13 provide payment done within the next three to five years. The court may also deny the discharge to a debtor that has filed for Chapter 7 or 13 if they fail to complete the instructional course regarding financial management.
Unfortunately, the Bankruptcy Code offers limited exemption to those who cannot take the educational course and you have to be either disabled or an active military in duty to be exempted from taking the course.
Q: How can someone be discharged from his or her debts?
A: The debtor usually gets an automatic discharge unless there is a litigation involving any objections against the discharge. The bankruptcy court mails copy of the discharge to all creditors, US trustees and the trustees’ attorney. The debtor and his or her attorney also receive the copy of the discharge notice.
This notice lets every party involved that the debts owed to them have been discharged and that they should not make any advances when it comes to collecting any payment from the debtor. If the clerk fails to send the notice to the debtor or creditor, then the rules are not taken in effect.
Q: Are the debts discharged or only some?
A: Unfortunately, not all debts are relieved or discharged the fact that they are discharged under each chapter stipulated on the Bankruptcy Code. This means that the debtors need to pay the debts after the bankruptcy proceedings. Moreover, the congress has already determined that there are debts that are not dischargeable based on the nature o the debts, the behavior of the debtors and other factors.
There are basically 19 debt categories that are exempted from discharge and these categories are found on Chapters 7, 11 and 12. On the other hand, Chapter 13 is offered with limited exceptions. Thus here are the common non dischargeable debts that a debtor should be aware of:
• Several types of tax claims,
• Debts that are not straightened out by the debtor and also schedules that the debtors need to file in the court,
• Debts due to child support and alimony,
• Debts obtained from malicious injuries against other people,
• Debts to different government units such as fines and penalties incurred,
• Debts from educational loans,
• Debts for personal injury caused by vehicular accidents,
• Debts owed to retirement plans,
• Debts obtained from housing fees
A discharge of debt is available to the debtor in Chapter 13 than in Chapter 7. The debts that are dischargeable in Chapter 13 are debs that are incurred from malicious and intentionally injury to a property. Moreover, debts that are made from child support alimony and property settlements are non dischargeable.
On the other hand, even though a debtor filing under Chapter 13 bankruptcy receives discharge after the completing the payment through the repayment plan, the debtor is offered limited alternatives which may allow him or her to file for hardship discharge even without completing the repayment plans. This type of discharge is only available to a debtor who fails to complete paying the debt due to circumstances beyond his or her control.
The scope of the hardship discharge under Chapter 13 is slightly similar to Chapter 7 when it comes to the types of debts that are exempted. This type of discharge is also available for Chapter 12 only if there is a failure to complete the payment due to circumstances that the debtors is not justifiably accountable for.
Q: Do creditors have the right to object a discharge or does a debtor allowed to file for discharge?
A: In the case of Chapter 7, the debtors are not given the right to a discharge. However, the creditor can file for an objection to a debtor’s discharge. Once filed, the creditors usually receive a notice which contains the deadline when to object for the discharge. If the creditor wants to object, then it must file a complaint in the bankruptcy court before the deadline that was set in the notice. This process is called as the adversary proceeding.
• The court has the power to deny a discharge under Chapter 7 for any reasons stipulated under Section 727(a) of the Bankruptcy Code which includes:
• Not being able to provide the necessary tax documents,
• Not being able to complete the personal financial management course,
• Concealment of the property to delay the proceeding and mislead the creditors,
• Concealment of records and evidences of the properties,
• Committing fraudulent acts,
• Not being able to justify the loss of assets,
• Violation of a particular court order that was commenced within a particular time frame.
If the issue regarding the debtor’s right to acquire discharge goes to trial then the party that objects the discharge has the task of providing the evidences to justify their objections.
Under Chapter 12 and 13, the debtor is given discharge as soon as the payments are completed. In chapter 7, on the other hand, the discharge may or may not occur as with Chapter 13 if the debtor does not complete the course regarding personal financial management.
Moreover, the debtor is also ineligible to be given discharge under Chapter 13 if the debtor has already received discharge already. The different between Chapter 13 from Chapter 7 is that the creditors can object to confirm the newly structured payment plan but he cannot object to the discharge if the debtor has already started paying the amount stipulated under the new payment plan.
Q: Can a debtor be allowed to receive a second discharge under a later case in Chapter 7?
A: The court usually does not give any discharge in the later case under Chapter 7 if the debtor has already received discharge from the same bankruptcy category eight years before the second petition has been filed.
Moreover, the court also denies discharge if the debtor has already received discharge under Chapter 12 and 13 bankruptcies within the past six years unless the debtor was able to make full payments to the debt and the debtor has made at least 70% of the unsecured debts as stipulated in the new repayment plan.
On the other hand, the debtor is not eligible to file for discharge under Chapter 13 if the debtor has received discharge from any of the remaining bankruptcy chapters four years ago.
Q: Is It Possible To Revoke The Discharge?
A: Yes. It is possible to revoke the discharge under certain circumstances. For instance, a creditor can request to the court to revoke a debtor’s discharge under Chapter 7 bankruptcy based on the claim that the debtor has:
• Gotten the discharge in a fraud way,
• Failed to disclose that he or she has acquired a property that will make up for the property that was in the bankruptcy estate,
• Committed acts of impropriety based on the Section 727(a) (6) under the Bankruptcy Code,
• Failed to justify any mistakes made during the statement of audit,
• Failed to comply with the requirements or give out the necessary information that is requested during the audit.
In most case, a request to revoke the discharge of the debtor needs to be filed within one year when the discharge was files or when the date the case will be closed and resolve. After filing, the court will be the one to decide if the allegations are true or if the discharge can be justified to be revoked or not.
In Chapter 11, 12 and 13 bankruptcy cases, if discharge is obtained by a debtor from fraudulent means, then the court can revoke the order of the discharge completely.
Q: Is the debtor required to pay a discharge debt after the bankruptcy case has been concluded?
A: A debtor who was granted a discharge can repay his or her discharge debt voluntarily. The discharge debt can be paid even if it is no longer legally enforced but most of the time, a debtor usually pays the debt because it is owed to a particular member of the family or if the debtor sees it as an obligation and if the debtor does not want his or her reputation to be tainted.
Q: If a creditor attempts to make collections from a discharge debt after the case has been concluded, what can a debtor do?
A: In most cases, a creditor will usually attempt to make efforts to extract payment from the discharge debt. In this case, the debtor can file for a motion in the court to address the problem. The court will usually allow the debtor to file a motion in order to ensure that the discharge is not being violated nor abused.
The discharge is made up of a permanent statutory injunction that prohibits the creditors from taking any further action such as collection of payment and also filing a lawsuit against the debtor. If the court finds out that the discharge has been violated, the sanction is usually faced by the creditor for civil contempt and this usually punishable by paying a huge fine.
Q: Are employers given the right to terminate the debtor’s employment especially if the debtor failed to pay the discharged debt?
A: The law condemns discriminatory acts against a debtor thus the employers do not have the right to terminate the employment of their employees who are considered as debtors.
The law simply prohibits any form of discrimination against bankruptcy debtors and these prohibitive actions include:
• Termination of employees,
• Discrimination during the hiring process,
• Suspension, revoking and taking other discriminatory actions that may endanger the job of an employee.
Simply put, a private employee may not discriminate a debtor when it comes to their employment simply because they have insurmountable debt that they cannot pay.