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If you've filed for bankruptcy, the bankruptcy court will grant a discharge of certain debts that existed on the day you filed for bankruptcy. You should know what kinds of debts are dischargeable in bankruptcy, exceptions to discharge that might apply, and what the discharge means for you.

A discharge in bankruptcy means that your personal liability for a debt is eliminated. The discharge also acts as an injunction against collection efforts; this means creditors can no longer try to collect the debt. However, not all debts are eligible for discharge, that is "dischargeable." Some categories of debt aren't dischargeable, and there are exceptions to discharge. For example, you might reaffirm a particular debt, such as a car loan, and continue to pay the debt.

Dischargeable Debts

In a Chapter 7 case, the following types of debts are dischargeable:

• Business debts
• Leases
• Judgments against you, including car accident claims
• Deficiencies existing after vehicle repossessions
• Personal loans
• Credit card account balances
• Negligence claims
• Liabilities under guaranty agreements

These types of debts will be discharged in a Chapter 7 bankruptcy case unless a creditor asks the bankruptcy court to determine whether they should be discharged:

• Property settlements and debt obligations arising from your divorce
• Debts resulting from your breach of a fiduciary duty
• Debts resulting from fraud or dishonesty
• Debts resulting from the willful and malicious injury of others

It's very important to be aware of the types of debt that aren't dischargeable in bankruptcy. You should know what to expect if you're considering filing for bankruptcy, and what your obligations might be once the court grants your discharge.

Determining Dischargeability

Shortly after you file for bankruptcy, you must file schedules listing your debts and creditors, a statement of your financial affairs, along with other documents. These filings will provide information about your financial circumstances, your eligibility for Chapter 7 relief and whether you're claiming any property as exempt from creditors' claims.

The bankruptcy court sends a notice to your creditors, informing them that you've filed for bankruptcy, with the details for the meeting of creditors under § 341(a) of the Bankruptcy Code. The notice includes deadlines for creditors to file proofs of claim, and to object to your discharge and the exemptions you're claiming. The permanent trustee, which is the person who administers your bankruptcy estate, is also named at this meeting. The trustee will liquidate the property making up your bankruptcy estate and oversee payment distribution to your creditors.

Discharge

Shortly after the deadline for objections to discharge passes, the court will enter an order of discharge. The court won't enter the order if you haven't filed the certificate showing your completion of the required personal financial management course.

Discharge in Chapter 13 Bankruptcy Cases

A debtor also receives a discharge in a Chapter 13 bankruptcy case. Chapter 13 differs from Chapter 7 in that it gives a debtor a way to readjust or reorganize debts, much like the reorganization available to businesses in Chapter 11 bankruptcy cases. In Chapter 13, you'll propose a Chapter 13 plan to pay various creditors primarily from your income, not your assets. However, it's possible your plan could include selling off some property. You'll likely pay your Chapter 13 trustee, who will distribute the payments to your creditors.

When you complete your plan, you receive a discharge under § 1328(a) of the Bankruptcy Code. A full compliance discharge is granted if you make all payments required by your plan. The discharge applies to all debts provided for by your plan and is broad in scope. A hardship discharge may be granted if you didn't make all plan payments. To receive a hardship discharge, you must show that you couldn't make the payments through no fault of your own, such as involuntary loss of your job. The court will have to find that modification of your plan isn't practicable. The hardship discharge applies to unsecured debts included in your plan.

Questions for Your Attorney

• If a creditor objects to discharge of a debt, how long does it take for the court to make a decision on the issue?
• What should I do if a creditor tries to collect on a debt after it's been discharged in bankruptcy, and do I have any remedies against the creditor?
• If I won't be able to make the payments under my Chapter 13 plan, what will a hardship discharge mean in my case, and are there other options available to me?

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