A bankruptcy discharge is issued at the end of a Chapter 7 or Chapter 13 bankruptcy case. The discharge in a bankruptcy case is a court order that relieves you of your obligation to pay debts that are covered by the discharge.
Our bankruptcy clients at Modestas Law Offices often ask basic questions about the discharge. If you are considering filing for bankruptcy or have already filed, our answers to those questions will be helpful to you.
Which debts are covered by the discharge depends on whether you filed for a Chapter 7 or Chapter 13 bankruptcy. In both cases, there are some types of debt that are not covered by the discharge.
In a Chapter 7 case, debts likely to be covered by the discharge include credit card debt, medical bills, personal loans, and other unsecured debts and loans. The U.S. Bankruptcy Code identifies a number of specific debts that are not discharged by a Chapter 7 bankruptcy, including:
In a Chapter 13 case, a slightly broader discharge of debts is available. Debts that are not discharged in Chapter 13 include:
The lists above are general and not all-inclusive. Depending on your circumstances, you may have other debts that will not be covered by a bankruptcy discharge. Those debts will still have to be repaid following the discharge. You should rely on your attorney to advise you on your individual circumstances.
The timing of the bankruptcy discharge is different in Chapter 7 and Chapter 13 cases.
In a Chapter 7 case, the court usually issues the discharge as soon as the 60-day period expires after the Section 341 Meeting of Creditors occurs. Generally, that means the discharge will be issued about three to four months after the petition is filed.
In a Chapter 13 case, the discharge is issued after the debtor completes all payments under the plan, which usually takes three to five years.
After the court issues the discharge, creditors can no longer attempt to collect on the debts that were discharged by the court’s order. Debts not covered by the discharge still can be subject to collection efforts by creditors.
The discharge operates as a prohibition against creditors taking any action on the debt. Creditors can be sanctioned by the court if they violate the discharge. The sanction usually is civil contempt, which is punishable by a fine.
In Chapter 7 cases, there is no absolute right to receive a discharge. Creditors, the trustee, and the U.S. Trustee can file objections to the discharge. If objections are filed, a separate proceeding in bankruptcy court begins. These proceedings are called bankruptcy litigation or bankruptcy adversary proceedings. The court will separately hear and determine any objections to the discharge.
The Bankruptcy Code sets out the specific reasons that objections to a discharge can be filed. They include:
In a Chapter 13 case, creditors can object to confirmation of the repayment plan, but they cannot object to discharge if the plan payments have been made. However, the court can deny a Chapter 13 discharge if the debtor does not complete the required financial management course or if there was a discharge in a previous case within a certain amount of time before the current petition was filed.
If no objections to a discharge are filed, the court will grant the discharge if all other requirements have been met.
The Bankruptcy Code provides that the trustee, a creditor, or the U.S. Trustee can ask the court to revoke the discharge under specific circumstances. For a Chapter 7 case, revocation can be requested if the debtor:
In a Chapter 7 case, a petition to revoke a discharge generally must be filed within a year after the discharge is granted or after the date the case is closed, whichever is later.
In a Chapter 13 case, revocation can be requested if the debtor committed fraud in obtaining the discharge. The revocation petition must be filed within a year after the discharge is granted.
If a discharge is revoked, all debts are reinstated as if the bankruptcy has never occurred. The debtor may also be subject to additional sanctions, including paying fines and penalties, forfeiting some assets, or facing criminal prosecution.
Revocation of a bankruptcy discharge generally occurs in situations where there is fraud or dishonesty during the bankruptcy process. For that reason, it is always very important to be completely honest and forthcoming about all your property and debts during the bankruptcy process.
Modestas Law Offices assists clients with Chapter 7 or Chapter 13 bankruptcy cases. We serve Illinois clients in Chicago, Cook County, DuPage County, and Will County. To accommodate clients who are busy during weekdays, we are available to meet in the evening and on weekends.
Contact us to schedule your initial free consultation.