Bankruptcy is a federal court process. Bankruptcy lets individuals and businesses either get rid of debts or repay debts according to a payment plan.

The person or business that has filed a bankruptcy case is called the debtor. A creditor is any person or business owed a debt on the date the bankruptcy case was filed.

A bankruptcy discharge is a court order that eliminates certain debts. The discharge bans creditors from taking collection action on discharged debts. Thus, creditors may not take legal action or even communicate with the debtor about the discharged debts.

Chapter 7

Chapter 7 is one type of bankruptcy. It normally governs liquidation of a debtor. Liquidation is a form of relief afforded by the bankruptcy laws that involves taking control of the property of the debtor, selling it and distributing the money to creditors. If the debtor is an individual, the process ends in the discharge of the debtor.

Discharge

A discharge lets an honest debtor begin a new financial life. A debtor who is granted a bankruptcy discharge is no longer responsible for the payment of debts included in the discharge.

In the typical chapter 7 case, the court gives the debtor a discharge early in the case. Generally, even before any money is paid to creditors. The discharge gets rid of all of the debtor's debts unless they are exceptions.

Any of the debtor's property that is not exempt property will be converted to money by the trustee and paid to creditors. If there is little or no property, creditors may receive nothing. A chapter 7 discharge frees the debtor from the obligation to pay the discharged debts and it prevents creditors from continuing attempts to collect the debt.

Waiver Prevents Discharge of Any Debts

The discharge of a debtor may be stopped if the court approves a waiver written by the debtor and given to the court after the debtor files the chapter 7 bankruptcy petition. A waiver prevents any of the debtor's debts from being discharged. A debtor will not even be able to discharge a debt through reaffirmation after a waiver is granted.

Requirements for a Waiver of Discharge

Generally there are four requirements for a waiver of discharge:

  • The waiver must be approved by the court
  • The waiver must be in writing
  • The waiver must be signed by the debtor
  • The waiver must be given to the court after the bankruptcy petition has been filed

Waiver Hearing

Generally, the court will hold a hearing to determine whether the debtor is fully aware of the consequences of a waiver of discharge. If the court determines that the debtor is not fully aware of those consequences, the waiver will not be approved.

Approval of Waiver

A court may consider a debtor's motives for requesting a waiver of discharge and will probably approve a written waiver of discharge if:

  • Granting the motion is in the debtor’s interest
  • The debtor clearly understood the consequences of his decision

Trustee Continues to Liquidate Assets after Waiver

A waiver of discharge doesn't release the trustee from her duties. The trustee will continue to liquidate the debtor's nonexempt property, including completing settlement of any lawsuits. Any unpaid debts survive bankruptcy, which means the debtor will still be responsible for repaying those debts.

Questions for Your Attorney

  • Is the debtor the only one who may request to waive a discharge?
  • Are any debts discharged if a waiver is granted?
  • Can a debtor file for Chapter 7 bankruptcy again after receiving a waiver of discharge?