Take Charge & Seek a Bankruptcy Discharge of Your Debts
What Is the Debt Discharge in Bankruptcy and How May It Affect You?
If you are considering filing bankruptcy, you’ve probably heard the term "discharge." Perhaps you have no idea what this term means, perhaps you have some understanding of its possible meanings and how they may apply to you.
Whatever your case, there’s no need to worry – more than 1 million Americans are expected to learn about and seek a discharge by filing bankruptcy sometime this year.
As the term "discharge" may refer to different things in bankruptcy cases, Bankruptcy.Me has put together a little primer on the different "discharge" meanings and how they may affect you if you file bankruptcy.
For more information on a debt discharge in bankruptcy, speak with a local bankruptcy attorney. At Bankruptcy.Me, all you have to do to get in touch with a local bankruptcy lawyer is fill out our free bankruptcy case evaluation form or call 888-632-0587.
Upon receiving your information or hearing from you, we’ll quickly work to connect you with one of our local sponsoring bankruptcy lawyers from our extensive network of attorneys across the country.
Discharge Definitions and What They May Mean to You
In bankruptcy cases, the term "discharge" may mean:
Your Exit from Bankruptcy.
In terms of both Chapter 7 and Chapter 13 bankruptcy, discharge refers to when your bankruptcy is over. In other words, you will exit or be discharged from bankruptcy after cooperating with and satisfying the terms and conditions of your case as set by the bankruptcy court.
An Elimination of Certain Types of Your Debts.
If you file Chapter 7 bankruptcy, you may get a discharge of certain unsecured debts (credit cards, payday loans, medical bills, other debts that are not tied to a piece of property).
This debt discharge in bankruptcy refers to your unsecured debts being excused and wiped totally clean from your slate, thus providing you with a fresh financial start.
You should also know that the bankruptcy trustee in your Chapter 7 case has the option of liquidating or selling some of your non-exempt assets in order to pay your creditors back for your unsecured debts; however, most Chapter 7 petitioners do not have any non-exempt assets, thus meaning that there is no sale of property.
What Types of Debts May Be Discharged if You File Chapter 7 Bankruptcy?
As mentioned above, Chapter 7 bankruptcy may allow you to have certain unsecured debts completely discharged or eliminated, including:
- credit cards;
- medical bills;
- most personal loans;
- payday loans;
- wage garnishments;
- judgments resulting from car accidents;
- deficiencies on repossessed vehicles; and
- some older tax debts.
As you may have inferred from the above list of debts, unsecured debt refers to any debt that is not backed by collateral (materials given as security for a loan). As an example, credit card debt is considered unsecured debt since a creditor can not sue for any property as a result of you owing on this debt. In other words, there is nothing backing your credit card debt that a creditor could go after if you don’t pay this debt.
In contrast, a mortgage loan is a form of secured debt, as your home is a piece of property that a creditor could foreclose on if you do fall behind on and don’t make your mortgage loan payments.
So What Does This Mean to You In Terms of Chapter 13 Bankruptcy?
Chapter 13 bankruptcy differs from Chapter 7 bankruptcy in that it does not offer this debt discharge but rather revolves around a repayment plan for your secured debts. In other words, if your home is in danger of foreclosure, you may be able to file Chapter 13 bankruptcy and establish a 3-5 year repayment plan in which you would keep your home as long as you stayed up-to-date with current mortgage payments and caught up over time on past-due mortgage payments.
So when you hear the term "discharge" in Chapter 13 bankruptcy, it generally refers to your exit from Chapter 13 bankruptcy (i.e. your Chapter 13 case being over).
So Which of Your Debts May Not Be Discharged in Chapter 7 Bankruptcy?
You should know that certain types of unsecured debts are not dischargeable in Chapter 7 bankruptcy, including:
- income tax (unless it is more than three years old, and your tax return was filed both on time and correctly);
- student loans (with the possible exception being if payment of the student loans is considered an "undue hardship" for the debtor);
- child support and alimony;
- marital debts (i.e. debts incurred in a divorce or separation agreement);
- intentional torts (debts resulting from a willful or malicious act);
- operating a vehicle while intoxicated (debts incurred from personal injury or wrongful death caused while driving under the influence of alcohol or drugs);
- fines and citations (i.e. traffic tickets, court-ordered restitution or other debts incurred from breaking the law);
- fraud (debts incurred through a fraudulent act or under false pretenses or representations); and
- recent credit card purchases/cash advances (debts owed to a single creditor for luxury goods are not dischargeable if they total more than $500.00 and were incurred within 90 days of filing bankruptcy; cash advances greater than $700.00 and obtained within 70 days of bankruptcy filing are not dischargeable).
As you can see, getting the debt discharge in bankruptcy can get a bit complicated, thus reinforcing the need to get in touch with a local bankruptcy lawyer who can explain the discharge process in greater detail and answer any of your questions.
At Bankruptcy.Me, we’ve made learning about bankruptcy and getting in touch with a bankruptcy lawyer all about you – simply fill out our free bankruptcy case evaluation form or call (888) 632-0587, and we’ll help connect you with a local bankruptcy attorney sooner rather than later.
The above summary is not legal advice. Laws may have changed since our last update. For the latest information on bankruptcy laws, speak to a local bankruptcy lawyer in your state.