The bankruptcy discharge varies depending on the type of bankruptcy protection case. Below are some of the most frequently asked questions about the discharge available to you under chapters 7, 11, 12, and 13.
- What is a discharge in bankruptcy?
- When does the discharge occur?
- How do I get a discharge?
- Are all debts discharged or only some?
- Do I have a right to a discharge or can creditors object to the discharge?
- Can I receive a second discharge in a later case?
- Can bankruptcy judges revoke a discharge?
- Can I pay a discharged debt after the bankruptcy case has concluded?
- What can I do if my creditors attempt to collect a discharged debt?
- Can I be fired for failure to pay or repay a discharged debt?
Up | 1. What is a discharge in bankruptcy?
A bankruptcy discharge releases you from personal liability for certain specified types of debts. In other words, you are no longer legally required to pay discharged debts. The discharge is a permanent order prohibiting your creditors from taking any form of collection action on discharged debts, including legal action and communications with you, such as telephone calls, letters, and personal contacts.
Although you are not personally liable for discharged debts, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.
Up | 2. When does the discharge occur?
The timing of the discharge varies depending on the chapter. In chapter 7 (liquidation) case, for example, the court usually grants the discharge promptly on the expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse (60 days following the first date set for the 341 meeting). Typically, this occurs about four months after the date you file the petition with the clerk of the bankruptcy court.
In individual chapter 11 cases, and cases under chapter 12 adjustment of debts of a family farmer (or fisher) and 13 (adjustment of debts of an individual with regular income), the court generally grants the discharge as soon as practicable after the debtor completes all payments under the plan.
Since a chapter 12 or chapter 13 plan may provide for payments over three to five years, the discharge typically occurs about four years after the date of filing.
The court may deny your discharge in chapter 7 or 13 cases if you fail to complete “an instructional course concerning financial management.” The Bankruptcy Code provides limited exceptions to the “financial management” requirement if the U.S. trustee or bankruptcy administrator determines there are inadequate educational programs available, or if you are disabled or incapacitated or on active military duty in a combat zone.
Up | 3. How do I get a discharge?
Unless there is litigation involving objections to the discharge, you will usually receive a discharge automatically. The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the U.S. trustee, the trustee in the case, and the trustee’s attorney if any. You and your attorney also receive copies of the discharge order.
The notice, which is simply a copy of the final order of discharge, is not specific as to those debts determined by the court to be non-dischargeable, i.e., not covered by the discharge. The notice informs creditors generally that the court discharged debts owed to them and that they should not attempt any further collection. The court also includes in the notice that continuing collection efforts subjects creditors to punishment for contempt.
Any inadvertent failure on the part of the clerk to send you or any creditor a copy of the discharge order promptly within the time required by the rules does not affect the validity of the order granting the discharge.
Up | 4. Are all debts discharged or only some?
Bankruptcy does not discharge all debts. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, you must still repay those debts after bankruptcy.
Congress has determined that these types of debts are not dischargeable for public policy reasons (based either on the nature of the debt or the fact that the debts stemmed from improper behavior of the debtor, such as the debtor’s drunken driving. There are 19 categories of debt excepted from discharge under chapters 7, 11, and 12. A more limited list of exceptions applies to cases under chapter 13.
Generally speaking, the exceptions to bankruptcy discharge apply automatically if the language prescribed by section 523(a) applies. The most common types of nondischargeable debts are:
- certain types of tax claims
- debts not set forth by the debtor on the lists and schedules the debtor must file with the court
- debts for spousal or child support or alimony
- debts for willful and malicious injuries to person or property
- debts to governmental units for fines and penalties
- debts for most government-funded or guaranteed educational loans or benefit overpayments
- debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated
- debts owed to a certain tax-advantaged retirement plan
- debts for a certain condominium or cooperative housing fees.
The types of debts described in sections 523(a)(2), (4), and (6) (obligations affected by fraud or maliciousness) are not automatically excepted from discharge. Creditors must ask the court to determine whether to exclude these debts from discharge. In the absence of an affirmative request by the creditor and the granting of the request by the court, the types of debts set out in sections 523(a)(2), (4) and (6) will be discharged.
A slightly broader discharge of debts is available to a debtor in a chapter 13 case than in a chapter 7 case. Debts dischargeable in chapter 13, but not in chapter 7, include:
- debts for willful and malicious injury to property
- debts incurred to pay non-dischargeable tax obligations
- debts arising from property settlements in divorce or separation proceedings.
Although a chapter 13 debtor generally receives a discharge only after completing all payments required by the court-approved (i.e., “confirmed”) repayment plan, there are some limited circumstances under which the debtor may request the court to grant a “hardship discharge” even though the debtor has failed to complete plan payments.
Such a discharge is available only to a debtor whose failure to complete plan payments is due to circumstances beyond the debtor’s control. The scope of chapter 13, “hardship discharge,” is similar to that in a chapter 7 case concerning the types of debts excepted from the discharge.
A hardship discharge also is available in chapter 12 if the failure to complete plan payments is due to “circumstances for which the debtor should not justly be held accountable.”
Up | 5. Do I have a right to a discharge or can creditors object to the discharge?
In chapter 7 cases, you do not have an absolute right to a discharge. An objection to the discharge may be filed by a creditor, by the trustee in the case, or by the U.S. trustee. Creditors receive a notice shortly after you file your case that sets forth important information, including the deadline for objecting to the discharge.
To object to your discharge, a creditor must file a complaint in the bankruptcy court before the deadline set out in the notice. Filing a complaint starts a lawsuit referred to in bankruptcy as an “adversary proceeding.”
The court may deny a chapter 7 discharge for any of the reasons described in section 727(a) of the Bankruptcy Code, including:
- failure to provide requested tax documents
- failure to complete a course on personal financial management
- transfer or concealment of a property with the intent to hinder, delay, or defraud creditors
- destruction or concealment of books or records
- perjury and other fraudulent acts
- failure to account for the loss of assets
- violation of a court order or an earlier discharge in an earlier case commenced within certain time frames (discussed below) before the date you filed the petition.
If the issue of your right to a discharge goes to trial, the objecting party has the burden of proving all the facts essential to the objection. In chapter 12 and chapter 13 cases, you are usually entitled to a discharge upon completion of all payments under the plan.
As in chapter 7, however, a discharge may not occur in chapter 13 if you fail to complete a required course on personal financial management. You are also ineligible for a discharge in chapter 13 if you received a prior discharge in another case commenced within time frames discussed in “Can I receive a second discharge in a later case?” below.
Unlike chapter 7, creditors do not have the standing to object to the discharge of chapter 12 or chapter 13 debtor. Creditors can object to confirmation of the repayment plan, but cannot object to the discharge if the debtor has completed making plan payments.
Up | 6. Can I receive a second discharge in a later case?
The court would deny a discharge in a later chapter 7 case if you received a discharge under chapter 7 or chapter 11 in a case filed within eight years before you file a second petition.
The court will also deny a chapter 7 discharge if you previously received a discharge in chapter 12 or chapter 13 case filed within six years before the date of the filing of the second case unless you:
(1) paid all “allowed unsecured” claims in the earlier case in full, or
(2) made payments under the plan in the earlier case totaling at least 70 percent of the allowed unsecured claims, and you proposed your plan in good faith, and the payments represented your best effort.
You are ineligible for discharge under chapter 13 if you received a prior discharge in chapter 7, 11, or 12 cases filed four years before the current case or in a chapter 13 case filed two years before the current case.
Up | 7. Can bankruptcy judges revoke a discharge?
The court may revoke a discharge under certain circumstances. For example, a trustee, creditor, or the U.S. trustee may request that the court revoke your discharge in a chapter 7 case based on allegations that you:
- obtained the discharge fraudulently
- failed to disclose the fact that YOU acquired or became entitled to acquire property that would constitute property of the bankruptcy estate
- committed one of several acts of impropriety described in section 727(a)(6) of the Bankruptcy Code
- failed to explain any misstatements discovered in an audit of the case
- failed to provide documents or information requested in an audit of the case.
Typically, a request to revoke your discharge must be filed within one year of the discharge or, in some cases, before the case closure date. The court will decide whether such allegations are true and, if so, whether to revoke the discharge.
In chapters 11, 12, and 13 cases, if confirmation of a plan or the discharge is obtained through fraud, the court can revoke the order of confirmation or discharge.
Up | 8. Can I pay a discharged debt after the bankruptcy case has concluded?
Although you’ve received a discharge, you may voluntarily repay any discharged debt. You may repay a discharged debt even though the creditor can no longer legally enforce the debt. Some examples include repaying a debt because you owed a family member or because it represents an obligation to an individual for whom your reputation is important, such as a family doctor.
Up | 9. What can I do if my creditors attempt to collect a discharged debt?
If a creditor attempts collection efforts on a discharged debt, you can file a motion with the court, reporting the action and asking the court to reopen the case to address the matter.
The bankruptcy court will reopen the case to ensure creditors do not violate the discharge order. The discharge constitutes a permanent statutory injunction prohibiting creditors from taking any action, including the filing of a lawsuit, designed to collect a discharged debt.
The court can sanction a creditor for violating the discharge injunction. The normal sanction for violating the discharge injunction is civil contempt, which is often punishable by a fine.
Up | 10. Can I be fired for failure to pay or repay 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 insolvent before or during the case, or has not paid a debt discharged in the case.
The law prohibits the following forms of governmental discrimination:
- terminating an employee
- discriminating concerning hiring
- denying, revoking, suspending, or declining to renew a license, franchise, or similar privilege
A private employer may not discriminate concerning employment if the discrimination is based solely upon the bankruptcy filing.