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Bankruptcy Discharge

When a debtor is discharged from a debt, the debtor is no longer liable for that debt. The creditor cannot seek repayment or use any collection actions because the debtor no longer owes the creditor any debt.

When does the discharge occur?

A discharge occurs either after a discharge hearing in a Chapter 7 bankruptcy case or after all payments are made under a repayment plan in Chapter 13 bankruptcy. However, not all debts are necessarily discharged and sometimes discharge is not granted at all.

Local Bankruptcy Laws for Bankruptcy Discharge

Many people don’t realize that there are several options with regards to discharge of bankruptcy. An individual filer may elect to either use the federal exemptions or to use local, state exemption options.  When filing, it is important to seek the counsel of a local bankruptcy lawyer who can instruct and give you bankruptcy legal advice regarding your local area. For example, should you need to file bankruptcy in Forth Worth, TX, you would want to contact an experienced bankruptcy attorney in that area.

How does the debtor get a discharge?

A debtor gets a discharge in Chapter 7 bankruptcy so long as there are no objections from creditors and the court deems it appropriate. In Chapter 13 bankruptcy, a debtor is discharged after meeting all obligations under a three or five year repayment plan.

Does the debtor have a right to a discharge or can creditors object to the discharge?

Creditors may object to discharge in Chapter 7 during or before the discharge hearing. A debtor may still receive discharge in spite of the objection or the court may not grant discharge on certain debts. In Chapter 13, the creditor files objections to the repayment plan but once the repayment plan is approved, the debtor has a right to discharge if all payments are made. Certain debts by law are not discharged under either Chapter 7 or Chapter 13.

What debts will not be erased or discharged if I file for bankruptcy?

All debts that are nondischargeable will not be erased after bankruptcy. What is dischargeable depends on whether the debtor files under Chapter 7 or 13 and the applicable laws. However, certain debt is nondischargeable under both.

Can a court cancel a promissory note? Yes, bankruptcy discharge removes liability for a debtor who signed a promissory note and failed to pay back the agreed payments. Whether a particular promissory note can be canceled depends on whether the particular debt is dischargeable.

Can I erase my student loans by filing bankruptcy? No, student loans are not dischargeable through bankruptcy unless the court determines they should be dischargeable in light of an undue hardship. Undue hardships are limited to only certain circumstances.

Child support and spousal support payments are not dischargeable under Chapter 7 or 13 bankruptcy. The debtor must remain “current” on these payment. In other words, from the time the debtor files for bankruptcy, until the time of discharge, the debtor must make all appropriate child or spousal support payments or they will lose discharge eligibility. The debtor does not have to catch up on child or spousal support payments before filing a bankruptcy petition but they must make payments, including the failed payments that occurred prior to bankruptcy, after being discharged from other debts.

Court order damages are not dischargeable under Chapter 7 or 13 bankruptcy.

Credit cards: credit cards may be used and sometimes retained even after filing for bankruptcy. However, a debtor’s purchases made within 40 days of filing or cash advances within 20 days can be reviewed and may possibly be deemed fraudulent. Any fraudulently incurred debt (i.e. putting money on credit card thinking it will be discharged by bankruptcy) will not be discharged.

SBA loans are dischargeable. However, SBA loans are typically given when an individual gives takes on personal liability in exchange for the loan. For example, an individual seeking an SBA loan for their business may have a lien placed on their personal home when given the SBA loan. Thus, even though the business files for bankruptcy and is discharged from debt, the individual is still personally liable for the loan.

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