Phase 1: Bankruptcy


Explanation of a Bankruptcy Discharge in a Chapter 7 Case:


The Bankruptcy Court grants a discharge to the person named as the debtor in the Bankruptcy case. It is not a dismissal of the case and it does not determine how much money, if any, the Trustee in Bankruptcy will pay to creditors.


This discharge prohibits any attempt to collect from the debtor a debt that has been discharged. For example, a creditor is not permitted to contact a debtor by mail, phone, or otherwise, to file or continue a lawsuit, to attach wages or other property, or to take any other action to collect a discharged debt from the debtor. A creditor who violates this order can be required to pay damages and attorney’s fees to the debtor.


However, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtor’s property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case. Also, a debtor may voluntarily pay any debt that has been discharged.


The Chapter 7 discharge order eliminates a debtor’s obligation to pay a debt that is discharged. Most, but not all, types of debts are discharged if the debt existed on the date the bankruptcy case was filed. If the case was begun under a different chapter of bankruptcy and then converted to a Chapter 7, the discharge applies to debts owed when the bankruptcy case was converted.


Debts that are not discharged include:

  • Debts for most taxes.
  • Debts that are in the nature of alimony, maintenance, or support.
  • Debts for most student loans.
  • Debts for most fines, penalties, forfeitures, or criminal restitution obligations.
  • Debts for personal injuries or death caused by the debtor’s operation of a motor vehicle while intoxicated.
  • Some debts which were not properly listed by the debtor.
  • Debts that the bankruptcy court specifically has decided or will decide in this bankruptcy case are not discharged.
  • Debts for which the debtor has given up the discharge protection by signing a reaffirmation agreement in compliance with the Bankruptcy Code requirements for reaffirmation of debts.