Dischargeable Debts

A discharge in bankruptcy releases you from personal liability as to certain types of debts, which basically means that you are no longer required to pay for them.

If creditors haven't filed a suit to stop you from getting out from under your debts within 60 days of the "341 meeting" of the creditors that is set after you file bankruptcy, the court will enter an order granting the "discharge" of all dischargeable debts that existed on the date the case was filed.

The court may deny a discharge if you fail to complete a course concerning financial management.

What debts are discharged in Chapter 7?

Under the new law, you have to reaffirm your car loan within 45 days after the "341 meeting." You no longer have the option of continuing your car payments without reaffirming the loan. Once the loan is reaffirmed, if you default on your payments and the car is repossessed, you are liable for the repossession deficiency.

It is extremely important to note that Chapter 7 will not stop a repossession or foreclosure because the failure to make payments or pay off any arrears that are due will relieve the "automatic stay" and allow the repossession or foreclosure to proceed. Only Chapter 13 can delay a foreclosure but the payment obligations under that chapter are extensive.

If you have used property you own to "secure" debt, you could also choose to "redeem" the property by paying the secured creditor the current value of the property in a single cash payment.

Cathy Moran is a business and bankruptcy lawyer in the San Francisco Bay Area, and was one of the first bankruptcy specialists certified by the California State Bar. Her Web site Bankruptcy in Brief includes much information on bankruptcy.

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