For both individuals and corporate bodies who are suffering from bankruptcy, gaining a discharge is the main reason why you should file for a bankruptcy case – be it under the laws imposed on Chapters 7, 11, 12, or 13. But then again, a discharge is more than about your debts being released – that is, there is more to know when it comes to a discharge in bankruptcy.
In bankruptcy, discharge is about a debtor being released from some of his debts as specified by the bankruptcy court. With a discharge, debtors no longer have to pay for their debts to their creditors. A discharge also acts as an iron clad order wherein creditors no longer have any legal hold over debtors so they cannot take any form of collection or take legal action any longer against debts that are discharged.
When does discharge occur?
Just like the varying degrees of discharges depending on the specific bankruptcy chapters by which a case is filed so do the occurrence of discharges. Usually, a bankruptcy court can promptly grant a discharge upon the expiration of a filed case which typically takes about four months. However, there are instances wherein repayment plans have to be made just like with both Chapter 12 and Chapter 13 bankruptcy so discharges might occur years later after the date of the bankruptcy filing. Also, you should also be aware that a discharge can sometimes be denied and contested by a creditor which might delay the determination of the bankruptcy discharge on time.
Are discharges automatic?
Without any objections from creditors, a debtor can be automatically granted a discharge by the bankruptcy court. Both parties – debtors and creditors alike – receive notification of the final order of discharge issued by court.
You should know that as a debtor, you are still liable to pay some of your debts to creditors. This is because not all types of debts filed in bankruptcy is dischargeable. The Bankruptcy Code, specifically Section 523(a), exempts certain types of debts from being discharged including unscheduled debts, alimony debts, debts owed to government due to fines, penalties, and taxes, and many others. For the record, almost all types of debts can be discharged but there are about a total of 19 listed categories of debts that are non-dischargeable under the four major bankruptcy chapters – 7, 11, 12, and 13.
What delays a bankruptcy discharge?
Aside from being contested by creditors, a bankruptcy discharge can be delayed when a debtor fails to provide the court with necessary requested documents. Also, cases of property concealment, perjury, court violations, and other fraudulent actions give the court more than enough reason to deny a discharge case. Another thing is that, failing to complete repayment plans which are observed under Chapter 11 and Chapter 13 bankruptcy can also delay your entitlement to a discharge. On most cases, fraudulent actions are second to the most common reason why your bankruptcy discharge can be revoked by court. Because debt discharges vary in each bankruptcy chapter, asking the help of an expert bankruptcy lawyer would be ideal to know which of your debts are likely to be discharged and which ones cannot be.