A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts.    Although the debtor in the bankruptcy is no longer legally required to pay the discharged debts, any joint debtors or guarantors will still be obligated to repay those debts.   The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.  An attorney from our office will discuss discharge with you in more detail.

Even though the debtor is not personally liable for discharged debts, valid liens, such as a mortgagees, and tax liens, upon specific secured property that have not been avoided (made unenforceable) in the bankruptcy case will remain after the bankruptcy case.  Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.

Timing of Discharge:
Unless there is litigation involving objections to the discharge, the debtor will usually automatically receive a discharge.  The timing of the discharge varies, depending on the chapter under which the case is filed.  In a chapter 7 case, the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse, which is 60 days following the first date set for the 341 meeting. Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court.

Not all debts are discharged:
The debts discharged vary under each chapter of the Bankruptcy Code.  Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors.  Therefore, the debtor must still repay those debts after bankruptcy. Congress has determined that these types of debts are not dischargeable for public policy reasons (based either on the nature of the debt or the fact that the debts were incurred due to improper behavior of the debtor, such as the debtor’s drunken driving).

The most common types of non-dischargeable debts are:

• certain types of tax claims
• debts not set forth by the debtor on the lists and schedules
• spousal or child support or alimony
• debts for willful and malicious injuries to person or property
• debts to governmental units for fines and penalties
•  debts for most government funded or guaranteed educational loans
•  debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated
• debts owed to certain tax-advantaged retirement plans and
• debts for certain condominium or cooperative housing fees.

Chapter 13 Discharge:
A slightly broader discharge of debts is available to a debtor in a chapter 13 case than in a chapter 7 case.   Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property, debts incurred to pay non-dischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings.  Although a chapter 13 debtor generally receives a discharge only after completing all payments required by the court-approved repayment plan, there are some limited circumstances under which the debtor may request the court to grant a "hardship discharge" even though the debtor has failed to complete plan payments. Such a discharge is available only to a debtor whose failure to complete plan payments is due to circumstances beyond the debtor’s control.

If you are considering filing for bankruptcy and don't know if certain of your debts are non-dischargeable, please give us a call and schedule a free consultation with an attorney. We'll make the determination for you.

Call Buckey and Schurter, Bankruptcy Attorneys at 951-278-2224.