The Chapter 7 Discharge

The reason you file Chapter 7 is to obtain a discharge from your debts, and begin a “fresh start.” What follows is a summary (again, talk to your lawyer) of the mechanics of discharge in a Chapter 7 case.

HOW IS DISCHARGE ENTERED

Roughly sixty days after your case has been filed, and assuming you have completed all requirements, the court will enter an order granting your discharge. This means that you no longer owe the discharged debt, unless you have reaffirmed it.

DEBTS WHICH ARE NOT DISCHARGED

This is not intended to be an inclusive list of debts that are excluded from discharge, but is a synopsis of what most Chapter 7 debtors may expect:

  • Domestic support obligations;

  • Certain fines, penalties, and orders to pay restitution resulting from criminal proceedings;

  • Certain taxes, including fraudulent income taxes, property taxes that became due within the previous year, and business taxes;

  • Court costs;

  • Debts which were incurred as a result of a DUI

  • Condominium fees or other owner association fees accruing after you filed bankruptcy

  • 401(k) and other loans owed to a retirement plan;

  • Debts not discharged in a previous bankruptcy;

  • Debts you didn’t include in your schedules

  • Student loans, unless the court grants a hardship discharge

  • Debts which the court has deemed to be excepted from discharge based upon an objection filed by the trustee or a creditor.

LIENS AND MORTGAGES

A discharge in bankruptcy acts only upon an indebtedness. It does not affect a lien or mortgage. So even if you received a discharge, a creditor holding a mortgage or lien may nevertheless be entitled to enforce that lien or mortgage under state law, such as by foreclosure. There are certain situations where liens or mortgages may be either avoided entirely, or reduced in amount. This is, however, beyond the scope of this article and should be discussed with your attorney. It is enough to understand that the discharge relates only to an indebtedness, and will not necessarily affect and related lien or mortgage.

CO-SIGNORS, GUARANTORS

A debtor’s discharge is limited to that debtor only. So if you discharge a debt on which there was a co-signer or guarantor, they remain fully liable.

CORPORATIONS, LLC’S

Only a debtor who is an individual person can obtain a discharge. Legal entities such as corporations or limited liability companies do not receive a discharge.

TIME BETWEEN DISCHARGES

You may not receive a discharge in a Chapter 7 case if you received one within the preceding eight years.