Under federal bankruptcy laws, a debtor who is granted a bankruptcy discharge is no longer responsible for the payment of debts included in the discharge. The debts that are eligible for discharge vary under the different bankruptcy chapters. Chapter 7 bankruptcy requires the debtor to liquidate his assets and pay creditors according to certain priorities, with most unsecured debts subject to discharge. Chapters 11, 12 and 13 allow the debtor to reorganize and repay prioritized debt. Most of the remaining debt is then discharged.

How is Discharge Obtained?

In the bankruptcy petition, the debtor lists all of his outstanding debts. Unless a creditor makes a timely objection to discharge, discharge of a debt is automatically granted.

When is Discharge Granted?

The time of discharge depends on the type of bankruptcy petition that is filed. The court grants discharge approximately four months after the filing of a Chapter 7 bankruptcy petition. In Chapters 12 and 13 cases, discharge is not entered until after the debtor completes repayment of his debt under the repayment plan. In Chapters 12 and 13 cases this is in about four years. Under Chapter 11, discharge is granted when the repayment plan is confirmed. The Chapter 11 debtor must then pay the debt listed in the repayment plan and any debts that would be considered nondischargeable under Chapter 7.

When Is Discharge Denied?

Discharge may be denied if the debtor commits fraud or engages in misconduct during the bankruptcy proceeding.

What Debts are Dischargeable?

Some debts, whether for public policy or other reasons, are not subject to discharge in bankruptcy. Nondischargeable debts include certain taxes, liens and fines, student loans, child support, maintenance and alimony obligations, debts that arose as a result of the debtor’s fraudulent acts or driving while intoxicated, criminal fines, penalties, and restitution orders, and debts that were not discharged in previous bankruptcies. In Court judgments for malicious and willful injuries and property settlements arising from separation or divorce or not dischargeable, except in some Chapter 13 bankruptcies.

What Debts Survive Discharge?

Debts that are not listed on the debtor’s bankruptcy petition will not be discharged. In addition, any debt that is long-term debt or that the debtor takes on after bankruptcy is not subject to discharge. While secured debts are discharged, if the debtor wishes to keep the asset, such as a car or mortgaged home, he must make up any arreage and remain current on his payments. Debts that are reaffirmed, as discussed below, will not be discharged.

Reaffirmation of Debts

Despite the availability of discharge, a debt may wish to pay debts that would normally be discharged. This is called reaffirmation. The courts will only allow reaffirmation if there is no coercion involved and the reaffirmation is in writing.

Penalty for Attempted Collection of Discharged Debts

Creditors may not pursue collection activities for those debts that are discharged in bankruptcy. If a creditor does so, the debtor has the right to file a motion with the bankruptcy court. The court may then impose contempt of court fines upon the creditor.

Conclusion

Depending on the type of bankruptcy filed, bankruptcy allows the debtor to avoid paying certain debts. Some debt, such as support obligations and taxes are not dischargeable. Debts that the debtor fails to list will also be denied discharge. The debtor may pay previously discharged debts that are reaffirmed in writing.