A permanent order that releases the debtor from personal liability for certain specified types of debts, thereby releasing the debtor from any legal obligation to pay any discharged debts. The discharge in bankruptcy order also prohibits creditors from taking any form of collection action on the discharged debts. However, valid liens on specific property to secure payment of debts that have not been discharged, will remain in effect after the discharge, and a secured creditor has the right to enforce the liens to recover such property.
What is Discharge In Bankruptcy
All debts are not discharged in a discharge in bankruptcy. In fact, there are 19 types of debt that are exempted from discharge for bankruptcy filings under chapters 7, 11 and 12, with a more limited list of exceptions applicable for Chapter 13 filings.
The timing of the discharge also varies, depending on the chapter under which the bankruptcy filing is made. In individual cases under chapters 11, 12 or 13, the court typically grants the discharge as soon as practicable after the debtor completes all payments under the plan.
Bankruptcy is a federal court process. Bankruptcy lets individuals and businesses either get rid of debts or repay debts according to a payment plan.
The person or business that has filed a bankruptcy case is called the debtor. A creditor is any person or business owed a debt on the date the bankruptcy case was filed.
A bankruptcy discharge is a court order that eliminates certain debts. The discharge bans creditors from taking collection action on discharged debts. Thus, creditors may not take legal action or even communicate with the debtor about the discharged debts.
Chapter 7 is one type of bankruptcy. It normally governs liquidation of a debtor. Liquidation is a form of relief afforded by the bankruptcy laws that involves taking control of the property of the debtor, selling it and distributing the money to creditors. If the debtor is an individual, the process ends in the discharge of the debtor.
A discharge lets an honest debtor begin a new financial life. In the typical chapter 7 case, the court grants a discharge early during the course of the case. Generally, even before any money is paid to creditors. The discharge gets rid of all of the debtor’s debts unless they are exceptions.
A debtor who gets a bankruptcy discharge is no longer responsible for the payment of debts included in the discharge. Chapter 7 bankruptcy requires the debtor to liquidate assets and pay creditors according to certain priorities, with most unsecured debts subject to discharge.