A bankruptcy discharge is a court order that basically relieves a person of personal responsibility for a debt amount. When a bank issues a bankruptcy discharge, the creditor can no longer collect on the debt, nor can they continue to make attempts to collect the debt. Thus, the creditor cannot:
- Make phone calls to collect on the debt
- Send demand letters
- File legal proceedings demanding payment
- Report non-payments to credit agencies
Bankruptcy discharge basically erases the debt from the person’s name. This is mostly associated with Chapter 7 bankruptcy proceedings, also known as “liquidation bankruptcy" or “straight bankruptcy." Other types of bankruptcy such as Chapter 13 may not offer the same discharge options. Instead, they may focus on other aspects such as repayment of the debt under modified terms.
Who Can Qualify for a Bankruptcy Discharge?
Bankruptcy discharges are generally only extended to individual consumers. That is, businesses and corporations usually do not qualify for bankruptcy discharges on their debt. Individuals filing for a bankruptcy discharge must meet certain qualifications. For instance, they generally must:
- Own some assets, which might be sold and used to help offset some of their current debt
- Meet the basic requirements for Chapter 7 bankruptcy, such as not having filed for bankruptcy within the last 8 years
- Participate in and complete a credit counseling/finance managing course
- Have a large amount of debt when compared to current income levels
- Provide accurate records of debts, income, listing of assets, and other documents to the court
Certain aspects can disqualify a person for a discharge, such as when the person’s debt has resulted from some sort of fraud or legal violation.
What Is Non-Dischargeable Debt?
Not all debts can be discharged through a bankruptcy proceeding. Some examples of “non-dischargeable debt” include:
- Student loans
- Debts related to personal injuries caused when the debtor was intoxicated, such as in a DUI claim or battery
- Debts related to taxes
- Criminal fine and other fines resulting from legal violations
- Family law debt such as alimony or child support
If you have a lot of non-dischargeable debt, you may wish to consider switching from Chapter 7 to Chapter 13 bankruptcy. These types of decisions are major decisions, and may require you to enlist the services of a bankruptcy attorney for advice on how these types of proceedings may affect you differently.
Do I Need a Lawyer for Help with a Bankruptcy Discharge?
A bankruptcy discharge can help a person obtain a new start with their financial situation. You may wish to hire a bankruptcy lawyer if you need assistance or advice with a bankruptcy discharge. Your lawyer can help advise you on the process and can inform you on what is needed to obtain the discharge. Also, if you need to file any lawsuits due to a dispute over debt, your lawyer can represent you during that type of court proceeding as well.