During the 12-month period that ended September 30, 2018, more than 760,000 Americans filed for bankruptcy under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. These Americans were facing seemingly insurmountable debts, but the bankruptcy process offered them a way out.
The way bankruptcy does so is through the discharge, a court order that terminates a debtor’s liability for most types of unsecured debts. But, although the discharge is such an important part of bankruptcy—and is the main reason most individuals who file for bankruptcy do so—it’s an aspect of the bankruptcy process that is not always well-understood by the general public.
Consequently, we have prepared this post to provide a brief overview of the bankruptcy discharge. If you are considering bankruptcy or would like more information about how it and the bankruptcy discharge work to give you a fresh start, contact the experienced bankruptcy lawyers of Haines & Krieger today.
What is the Bankruptcy Discharge?
The discharge is the ultimate goal of individuals filing bankruptcy. It is a court order that releases you from any further personal liability for credit card debt, unpaid utilities, medical bills, most court judgments, and most other types of unsecured debt. In other words, after the discharge, you will no longer be responsible for paying the discharged debts.
It also operates as a permanent injunction prohibiting creditors who hold discharged debts from attempting to collect them, such as by contacting you or filing a lawsuit against you. If a creditor violates the discharge order, you can file a motion with the bankruptcy court to punish the creditor, even after your case has been closed.
However, not all debts can be discharged. The exact types of debts that are non-dischargeable vary somewhat between different chapters of the Bankruptcy Code, but notably include the following (among others):
- Certain types of tax debts;
- Student loans;
- Debts for spousal support, child support, or alimony;
- Governmental fines and penalties; and
- Court judgments for personal injuries caused by the debtor while driving drunk.
The discharge order will not list the specific debts that have been discharged, but will generally describe the types of debts that are non-dischargeable and, accordingly, have not been discharged.
When Do You Receive the Discharge?
The bankruptcy court discharges your debt at the conclusion of your bankruptcy case. How long you have to wait for that depends on a number of factors, including:
- What type of bankruptcy you file; and
- Whether a creditor or the trustee files an adversary proceeding.
When you file a Chapter 7 bankruptcy, you generally receive your discharge within months of filing your bankruptcy petition. However, if a creditor or the trustee files an adversary proceeding challenging the discharge, then you will have to wait longer for the court to rule on that challenge.
In a Chapter 13 case, you will generally receive your discharge after completing a three-to-five-year repayment plan. That means you will typically have to wait roughly three to five years after filing to receive your discharge. Fortunately, a creditor generally cannot challenge your right to a discharge in Chapter 13; it can only challenge the repayment plan before the court confirms it.
Can the Bankruptcy Discharge be Denied or Revoked?
Although the discharge is the ultimate goal of an individual filing bankruptcy, it isn’t guaranteed. Section 727 of the Bankruptcy Code describes the circumstances in which a discharge may be denied in a Chapter 7 bankruptcy. For example, you are not entitled to a discharge under Chapter 7 if:
- After filing the bankruptcy petition, you fail to complete an instructional course concerning personal financial management
- You transfer, remove, destroy, mutilate, or conceal property within one year before filing bankruptcy—or after filing—with the intent to hinder, delay, or defraud a creditor or the case trustee;
- You conceal, destroy, mutilate, falsify, or fail to preserve records from which your financial condition can be ascertained;
- You knowingly and fraudulently make a false oath or account, present or use a false claim, or try to bribe the trustee; or
- You violate a lawful court order.
In addition, you are not entitled to a discharge under Chapter 7 if you received another Chapter 7 discharge within the past 8 years, or if you received a Chapter 13 discharge within the past 6 years. Similarly, you are not entitled to a discharge under Chapter 13 if you received a discharge under Chapter 7 within the past 4 years, or under Chapter 13 within the past 2 years.
A creditor or the trustee can file a lawsuit with the bankruptcy court (called an “adversary proceeding”) challenging your right to receive a Chapter 7 discharge, either in whole or in part, for the above reasons or because:
- You incurred a particular debt under false pretenses, false representations, or actual fraud;
- A particular debt results from fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny; or
- A particular debt is the result of your willful and malicious injury to another entity or the property of another entity.
Finally, a creditor or the trustee can ask the court to revoke your discharge even after it is granted in some circumstances, such as when you obtained the discharge fraudulently.
Contact a Las Vegas Bankruptcy Lawyer to Learn More About How the Discharge Can Give You a Fresh Start Financially
The bankruptcy discharge is a powerful, life-changing tool for individuals facing overwhelming debt, but obtaining it requires following all the rules of the Bankruptcy Code, which are complex and often confusing.
If you’re struggling keeping up with your debts in Nevada, contact our Las Vegas bankruptcy attorneys today for a free consultation. We will review your circumstances and provide more information about how bankruptcy can give you a financial fresh start.