What Is A Bankruptcy Discharge? Is There A Difference Between Chapter 7 And Chapter 13?
A bankruptcy discharge is a permanent injunction that the court enters related to debt that a party has included in their bankruptcy. The injunction is against the creditor from attempting to collect that debt, but there are also certain debts that are not discharged in bankruptcy.
The greatest example of a debt that is not dischargeable in bankruptcy is student loan debt.
There is really no difference between the discharge in a Chapter 7 versus a Chapter 13. The only difference would be certain debts that aren’t dischargeable in a Chapter 7 may be dischargeable in a Chapter 13.
What Is Dischargeable Debt And What Is Non-Dischargeable Debt?
Typically, all unsecured debt is dischargeable in a bankruptcy, with the exception of student loan debt. There are certain income taxes that a debtor might owe to the Internal Revenue Service that will not be discharged in a bankruptcy, as well.
There are very specific rules as to what income taxes can be discharged. Each circumstance will be specific to the individual, so you would need to discuss your situation with an attorney to see if your taxes can be discharged. A lot of people don’t realize that income taxes, under the right circumstances, can be discharged.
There are things spelled out in the bankruptcy code that prevent certain debts from being discharged. A debt would not be dischargeable if it resulted from…
- Fraud on the part of the debtor, or
- A motor vehicle accident that caused the death of another person while under the influence of narcotics or alcohol.
The creditor is required to come forward and assert that their debt is non-dischargeable. In the grand scheme of things, this only happens about 1% or 2% of the time.
At What Stage During The Bankruptcy Process Do You Receive a Discharge?
In a Chapter 7 bankruptcy, the discharge typically occurs approximately 90 days after the filing of the case.
In a Chapter 13 bankruptcy, the discharge can happen anytime between 36 to 60 months of the debtor’s plan of reorganization. The only way it happens sooner is if all the creditors are paid in full by the debtor prior to that 36- to 60-month commitment period.
Would The Court Ever Deny A Discharge In A Chapter 7 Case?
Yes, the court may deny a discharge in a Chapter 7 case. This would happen in the event the debtor has done something that would justify the bankruptcy court denying a discharge related to a particular debt. In a very rare situation, the court may even deny discharge across the board.
There’s either a non-dischargeability with respect to a single debt or the court enters an order preventing the debtor from getting a discharge across the board as to all debts. Typically, this would require some type of egregious conduct on the part of the debtor, and that is very rare.
Does The Debtor Have The Absolute Right To A Discharge Or Can A Creditor Object To A Discharge?
Creditors can object to discharge. Typically, they would have to object based upon a bankruptcy law that is spelled out and that would prevent their debt from being discharged.
How Should Someone Proceed With Pending Payments Etc. When Contemplating A Bankruptcy Filing?
Typically, you would only pay those obligations that your bankruptcy attorney informs you to be paying directly. Examples of payments most commonly paid while the bankruptcy is going on are…
- Mortgage payments,
- Car payments, and
- Any payments related to some piece of collateral that the Debtor is attempting to retain.
In those situations, the debtor will continue to make those payments. In a Chapter 13, they are obligated to make those payments and, if they don’t, they are violating the terms of their plan. Ultimately, their case could be dismissed pursuant to a motion by the Chapter 13 trustee.
For more information on Dischargeable & Non-Dischargeable Debts, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (888) 402-5557 today.