A bankruptcy discharge releases the defaulter from personal accountability for certain specified types of debts. In other words, the non payer is no longer legally required to pay any debts that are discharged. It serves as a breather for defaulters, who can start afresh to pay back the debt. Certain exceptional debts that are deceitful or illegal proceedings, alimony, student loans, child support and taxes are not dis-chargeable thus remains payable.
The discharge is a permanent order barring the creditors of the nonpayer from taking any form of collection action on discharged debts, as a matter of fact any means of collection including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts. The bankruptcy discharge varies depending on the type of case a debtor files: chapter 7, chapter 11, chapter 12, or chapter 13.
- Chapter 7: A bankruptcy judge endows the discharge as soon as the time for filing a complaint expires. The discharge can also be granted when the time set for filing a proposal for the release of a substantial case expires. This typically happens after four months of the date the defaulter files the case in a bankruptcy court.
- Chapter 11: Bankruptcy the discharge is granted to the individual by the court, with immediate effect, when all the payments under the plan have been completed by the debtor.
- Chapter 12: Bankruptcy is for family farmer or fisherman and the discharge takes place four years after it is filed.
- Chapter 13:On the whole is debt adjustment for individuals with regular income. The debtor usually gets three to five years to pay of debt. Due to this, the discharge takes place four years after it is filed.
How does the debtor get a discharge?
The debtor will automatically receive a discharge, unless there is lawsuit relating objections to the discharge. The Federal Rules of Bankruptcy process set for the clerk of the bankruptcy court to mail a copy of the discharge order to all creditors, the U.S. trustee, the trustee in the case, and the trustee’s attorney, if any. The debtor and the debtor’s attorney also receive copies of the discharge order.
What can the debtor do if a creditor makes an effort to collect a discharged debt after the case is over and done with?
If a creditor attempts to collect debt on a discharged balance due, the debtor can file a proposal with the court, reporting the action and asking for the case to be reopened to address the matter. The bankruptcy court will often do so to ensure that the discharge is not violated. The discharge represents a permanent statutory ban prohibiting creditors from taking any action, including the filing of a lawsuit, designed to collect a discharged debt. A creditor can be allowed by the court for violating the discharge ban. The normal permit for violating the discharge ban is civil contempt, which is often punishable by a fine.
Can the discharge be invalidated?
The court may cancel a discharge under certain circumstances based on allegations that the debtor: obtained the discharge fraudulently; or failed to explain any misstatements discovered in an audit of the case or fails to provide documents or information requested in an audit of the case. Typically, a request to cancel the debtor’s discharge must be filed within one year of the discharge or, in some cases, before the case is closed. The court will decide whether such allegations are true and, if so, whether to cancel the discharge.
May an employer terminate a debtor’s employment solely because the person was a debtor or failed to pay a discharged debt?
The law provides express prohibitions against discriminatory treatment of debtors by both governmental units and private employers. A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was in debt before or during the case, or has not paid a debt that was discharged in the case.