Bankruptcy: Understanding Why a Bankruptcy is Discharged

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What is a Bankruptcy Discharge?

At times, a debtor is released or discharged from liability for certain types of debts. The debtor will never have to pay off those certain debts. This takes away a lot of anxiety, as emotions fill a bankruptcy trial. Usually there is a lot of fear that comes from filing for bankruptcy. Some of this fear comes from thinking that creditors will constantly be calling and knocking on the door.

However, Fort Myers bankruptcy attorneys can help individuals understand that when bankruptcy is discharged, creditors cannot bother the debtor. The debtor will be free from the constant calls of creditors. However, if there is a lien then the creditors may still have a way to contact the debtor. Some liens will give the creditor a position to continue in bankruptcy court.

Fort Myers bankruptcy attorneys can discuss whether there are liens that can be avoided, and how to handle the situation if there are liens. Also, they will be able to help you understand the debts that can be forgiven and the debts that cannot be forgiven. This will create a clear picture of what is and is not a debt that can be forgiven. It is important to note that a discharge of debt does not mean that the case is over. It will not end until the court enters an order to close the case

When & Why it Happens

Receiving a discharge after filing for bankruptcy is a financial reset for an individual. Being able to start over financially is one of the main purposes of having bankruptcy. The debtor is allowed to proceed without creditors around every corner. Although, there are certain debts that can never be discharged. These debts will be discussed below.

Fort Myers bankruptcy attorneys can discuss when debts are usually discharged in a bankruptcy proceeding. The period when debts are discharged can vary based upon which chapter the debtor files under.

A Chapter 7 liquidation will usually have debts discharged after the time expires for filing a complaint. This time period will start after the petition has been filed with the correct bankruptcy court. The US Bankruptcy Courts say that this typically will occurs within four months of filing the petition with the clerk of the bankruptcy court.Fort Myers bankruptcy attorneys

A Chapter 13 filing is different than a Chapter 7, because of the different approaches. Chapter 7 is a liquidation of all property that can be taken. While Chapter 13 is a repayment plan for a certain time period.

Due to the fact that Chapter 13 is based on a repayment plan, discharge of any debt may take years. The US Bankruptcy courts say, “[a] chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs about four years after the date of filing.” The time periods of when debts are discharged are different between Chapter 7 and Chapter 13.

It should also be noted that bankruptcy courts may not allow debts to be discharged if the debtor has not attended “an instructional course concerning financial management.” Being vigilant in the process and taking all courses necessary during the bankruptcy proceedings, will determine whether or not debts will be discharged.

Understanding the Process with Bankruptcy Attorneys in Fort Myers

Usually the debtor will receive an automatic discharge of their debts, unless the discharged debts are being fought in litigation. There are Federal Bankruptcy rules that instruct the court to give notice to the creditors about the debts being discharged.

This notice will also tell the creditors that they cannot collect any debts from the debtor. Fort Myers bankruptcy attorneys can help explain the notice. If they try to collect after the debtor has been released from the debts, then the creditor may be punished.

It is important to have Fort Myers bankruptcy attorneys involved. They can understand the process involved in filing in bankruptcy court. They can also help clarify the process that is involved in sending a notice to creditors.

What Types of Debts Can and Cannot be Discharged in Both Chapter 7 and Chapter 13?

Certain debts have been said to be forgivable through rules and laws. While other debts can never be forgiven. Usually this comes down to public policy concerns. Also, discharged debts vary from chapter to chapter.

Section 523(a) of the Bankruptcy Code explains which debts cannot be forgiven under Chapter 7. This list represents some of the debts that are not forgiven under Chapter 7 bankruptcy. Some of the debts that cannot be forgiven are the following:

  • Taxes or customs duties
  • Stealing Money
  • Child Support
  • Debt that is a fine or a penalty

Usually debt forgiveness is easier under Chapter 13 bankruptcy than Chapter 7. The Bankruptcy code has said that there are certain debts that are forgivable under Chapter 13 that are not under other chapters. Some of the debts that are forgiven are debts for injury to property, debts to pay certain taxes, and debts that come after a divorce. Fort Myers bankruptcy attorneys understand the bankruptcy code and can help explain which Chapter would be most beneficial for each unique situation.

How can Fort Myers Bankruptcy Attorneys help in understanding whether or not bankruptcy discharges can be revoked?

Fort Myers bankruptcy attorneys can make it clear when a previous debt will still have to be repaid. Above this was discussed. If the debtor does not take the assigned financial class, then they may have their loan forgiveness taken away.

Usually discharges are reversed because of some bad act. This often involves lying that surrounds the discharge. This can happen when the debt forgiveness is obtained by lying to the court. The court can take action that will revoke debt forgiveness for other acts. Some of these other acts involve failing to complete tasks that are asked of the individual.

Fort Myers bankruptcy attorneys can assist in this process. Allowing the debtor to be aware of the little details that make up a bankruptcy case can help them make the decisions necessary.

Conclusion

Overall, understanding that there are certain debts that will be discharged heading into a bankruptcy proceeding can comfort the debtor. However, understanding that each chapter presents a different list of debts and that some chapters are more forgiving than others is important.

Also, having the debtor complete everything that the court asks will lead to a smoother and easier bankruptcy process. With the help of an experienced attorney and their advice, this process can be understood. If advice is sought from a professional, the list of debts that can be forgiven will be clear. Then any reversals can hopefully be avoided.