Individuals who can no longer afford to pay their debts can file for bankruptcy. This legal remedy provides relief for those with severe financial troubles. They must prove their incapacity to pay. Some of their assets may be liquidated to offset their debts. If they comply with all of the requirements and there are no other challenges, then they may be discharged by the court.
So what’s it mean when bankruptcy is discharged? For starters, the creditors will no longer be able to continue collecting money from the debtors. They will be barred from taking actions leading to the recovery of the borrowed amount. This gives people who have been buried in debts to begin anew and lead a life that is free from past burdens. A discharge is a good news for debtors, but not so much for creditors. Therefore, lending institutions must screen their clients well, to minimize the risk to their business.
Note that a discharge does not always waive all types of debts. There are some exemptions in the law, depending on the bankruptcy filing used. Examples include debts for child support, injuries caused to another person, fines owed to government units, educational loans, cooperative housing fees, and tax-advantaged retirement plans.
Various chapters can be used when filing for bankruptcy. These influence the timing of the discharge. It can range from a few months to a few years. For example, a Chapter 7 case often leads to discharge if there are no creditor complaints received after a short window. As for Chapter 11, 12, and 13 filings, the court will have to wait until all payments have been made over a period of 3 to 5 years.
It is possible for creditors or trustees to file objections to a Chapter 7 discharge, as long as they do it within the prescribed time frame. This action will result in an adversary proceeding which will be decided in court. A discharge may be denied if there is concealment of properties, destruction of records, non-submission of tax records, non-completion of a personal financial management course, and various fraudulent acts. The burden of proof lies with the accuser.
Path to Discharge
As long as there are no pending objections, the discharge should be enforced. The court will notify all of the creditors, trustees, and attorneys about its decision by mail. The validity of the order will not be affected by any failure on the part of the clerk of court to send out the copies. Be sure to get the assistance of really good bankruptcy lawyers to hasten the discharge.