For most debtors, the Chapter 7 discharge is the reason they go through with the stress of bankruptcy. The discharge is a Court Order that legally wipes away past debts included in the bankruptcy allowing for a fresh start financially. Common debts eliminated by the bankruptcy discharge are credit card bills, medical bills and personal guarantees on real estate and car loans.
What Does it Mean to Include a Debt in Bankruptcy?
In the typical Chapter 7 bankruptcy, the debtor will give a list of all their creditors and debts to their bankruptcy attorney. As part of preparing the case, the attorney will then file this list with the Bankruptcy Court. The Court then sends out notice of the bankruptcy filing to all creditors listed or included in the bankruptcy. Creditors who receive notice of the bankruptcy will be bound by the discharge order and their claims will be eliminated.
How is the Bankruptcy Discharge Enforced?
The bankruptcy discharge comes in the form of a Court Order which prohibits creditors from contacting the debtor for any reason about the discharged debt. After and during bankruptcy, creditors cannot call, file lawsuits or harass the debtor in any way. Creditors who continue to pursue debtors after bankruptcy, do so in contempt of court and face fines and sanctions.
How Soon After the Chapter 7 Case is Filed Will the Discharge Papers be Received?
Approximately two months after the Chapter 7 bankruptcy case has been filed, the Bankruptcy Court will issue an order, signed by the Bankruptcy Judge, formally discharging debts included in the bankruptcy. The bankruptcy discharge papers will be sent via mail to the debtor and all creditors by the Bankruptcy Court.
What Types of Debts Will be Eliminated by the Chapter 7 Discharge?
As a general rule, the Chapter 7 discharge will eliminate all unsecured debt, such as credit card debt, medical bills and personally guaranteed loans. Be aware that the bankruptcy discharge will not relieve your obligation to pay the mortgage or a car loan if you wish to keep the property. Alternatively, if you wish to surrender a home or car, you can do so with no continuing obligation to your lender as the bankruptcy discharge will break your personal guarantee.
What are the Limitations of a Chapter 7 Discharge?
Child support obligations, student loan debt and debts incurred through drunk driving are not dischargeable in bankruptcy. Similarly, debts incurred through fraud cannot be eliminated in bankruptcy.
If you are seeking more information about the scope of the Chapter 7 bankruptcy discharge, consult a bankruptcy attorney at The Sader Law Firm. We pride ourselves on helping to provide a fresh start to good people. We have more than 30 years of combined experience in Chapter 7 and Chapter 13 bankruptcy cases and can help provide you with real financial freedom. If you live in Kansas or Missouri, contact Neil Sader today for a free consultation at (816) 281-6349 to learn more about the options available to you.