Bankruptcy Discharge 101

The end game of bankruptcy or the main goal of a bankruptcy filing is to get your debt discharged. But what is a discharge really? We will explore the basics of bankruptcy discharge in the following discussion.

What Is A Bankruptcy Discharge?

First, let’s break down the vary basics of discharge. A discharge in bankruptcy is the order you receive from the Court that make certain debts forgiven and no longer enforceable in a court of law. The discharge is permanent and essential liberates you the debtor from any further collection activity. Many people think of the discharge and wiping the slate clean. Technically speaking, the bankruptcy discharge is a permanent injunction that you receive in place of the automatic stay that you receive immediately upon filing bankruptcy. Just like the automatic stay the discharge prohibits creditors from further collection activities or from filing a lawsuit. The discharge will also void any judgments against you that were received prior to the bankruptcy filing.

Personal Liabilities vs. Liens

While your personal liability for your debts can be discharged in a bankruptcy more than likely if you have a lien filed against one or more of your assets the lien will remain. This is a somewhat confusing aspect for most bankruptcy filers. To get a better understanding of why a lien will remain you need to think of yourself and your assets as individual and separate entities. The bankruptcy discharge release you from the personal liability of particular debts. However, the bankruptcy filing is not filed on behalf of your assets because they are their own entity, and therefore the personal liability for the assets is not discharged and a lien will remain against them. That is why your home loan or mortgage remains in effect after you file bankruptcy, because the mortgage company has a lien against your property until it is paid in full.

Non Discharged Debts

While most debts are discharged in bankruptcy there are a number of debts that cannot be discharged through either Chapter 7 or Chapter 11 bankruptcy. 11 U.S.C. 523 provides a complete list of the non dischargeable debts. Those debts include:

  • Spousal or child support;

  • Certain tax debts, including income taxes;

  • Debts resulting from criminal activity; and

  • Student loans

Debts that are not discharged through your bankruptcy filing remain valid and active. If you remain current on your payments of those debts, like your mortgage, the account or debt will remain current and will help rebuild your credit score. If you default on those non-discharged debts the creditor can commence collection activities and can file suit for non-payment. Now that you have a better picture of what a discharge is you probably have a better understanding of why it is considered the end game of bankruptcy. To get the best bankruptcy outcome you will need to work with a qualified bankruptcy attorney. The attorneys at Goldbach Law Group will ensure that they get as many of your debts discharged as possible by using uncommon exemptions and other tools in their bankruptcy arsenal.

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