by Tanya Davis
Bankruptcy is a process enacted by Congress under the United States Code. Because it is a federal process, it is uniform across the country. There are official forms and legal procedures for dealing with debt for both individuals and for businesses. Each state has at least one bankruptcy district, for a total of 90 districts nationwide. Each district then has its own clerk’s office and a U.S. district court trustee.
A “discharge” is an action taken by the court that releases the debtor from an obligation to pay certain debts. A discharge is a permanent court order, and if you get one it means that your creditors cannot contact you by phone or by mail, or take any sort of legal action to try to get you to pay the debt. Discharges in most cases are given automatically.
When will the Debt be Discharged?
Debts under bankruptcy are discharged at different times depending on which type of bankruptcy you filed. The following are examples of typical time periods for discharge, though they will vary from case to case:
- Chapter 7 – four months after filing
- Chapter 11 – 5 plus years
- Chapter 12 and 13 – 4 years
Will All My Debt Be Discharged?
There are 19 categories of debt that are not discharged under chapter 7, 11, or 12. There are slightly less that are not discharged under chapter 13.
Here is a partial list of items you will not be able to discharge:
- Tax claims
- Debts you failed to file with the court
- Child support
- Alimony
- Debts due to your own willful or malicious injury to another person or property
- Government fines and penalties
- Government guaranteed student loans
- Debts due to your own DUI actions
- Some condo or cooperative housing fees
- Fraudulent or malicious debts
You do not have an “absolute right” to a discharge of your debts. For example, if your creditor files a complaint with the court objecting to the discharge of their debt, the court may agree that you have to pay that debt. Also, if you fail to cooperate with the court, either by not providing documents or by concealing records or property, the court may choose to deny your discharge. Additionally, since 2005 debtors have been required to complete a course on personal financial management prior to filling bankruptcy; if you do not complete this course, this is grounds under the Bankruptcy Code for you to be denied a discharge.
Occasionally a discharge can be revoked. This is usually due to cases of fraud or impropriety. For example, you hid property or other assets, or you acquired property during the bankruptcy but did not disclose it.
After the Discharge
Once you have obtained a discharge, your creditors should not contact you any longer. If they do, you can file a motion with the court. The court will sanction the creditor, usually charging him or her with civil contempt.
Occasionally a debtor will get a discharge, but choose to go ahead and pay the debt. For example, you owe money to a relative, and the debt is discharged, but you still feel a moral obligation to make good on the loan.
Although bankruptcy discharge removes your obligation to pay, you should be aware that it also puts a black mark on your credit record for 7 to 10 years. Bankruptcy is a last-resort solution – it should only be chosen when there is no other way to meet your debt obligations. The bankruptcy laws are complex, so be sure to consult with an attorney before choosing to file.
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