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Congratulations, you have successfully completed your Chapter 13 Bankruptcy case and received your Discharge! 

But…just what is a Discharge anyway!?!

 

The most frequently asked question I get from my clients is “WHAT IS A DISCHARGE?” So, in this Chapter 13 Series Blog installment I am going to fully explain what a Chapter 13 Bankruptcy Discharge is and what it means to you and your creditors going forward.

“The goal of Bankruptcy is to give you a ‘fresh start.’ The Supreme Court made this point about the purpose of the bankruptcy law in the 1934 decision of the case Local Loan Co. v. Hunt, 292 U.S. 234, 244, ‘it gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.’  This goal is accomplished through the Bankruptcy Discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts.”  –www.USCourts.gov

 

First let’s start with the definition: a Chapter 13 Bankruptcy Discharge is a court order stating that you completed your Plan payments, and are no longer responsible to repay the any outstanding unsecured debts listed on your Chapter 13 Bankruptcy Petition.

Next, we will explore what a Discharge means to you.

Once you have completed all of the steps in the Chapter 13 Bankruptcy Process, (credit counseling, filing your petition, attending your Section 341 Meeting and Confirmation Hearing, completing your personal financial management course and paying all of your Plan payments), you will then receive in the mail a 2 page document entitled “Discharge of Debtor.”

When most people receive this final document they expect it to be very specific and state exactly what debts have been discharged.  Unfortunately, the document simply states “it appearing that the debtor is entitled to a discharge, it is ordered: the debtor is granted a discharge under section 1328(a) of title 11, United States Code, (the Bankruptcy Code).”  It does not list the debts that have been discharged in detail, but rather applies to all of the debts that you listed on your Chapter 13 Bankruptcy Petition, unless otherwise ordered by the Bankruptcy Court.

The second page (or back side, depending on how the Court prints the document) of your Discharge will have the Court’s “explanation of Bankruptcy Discharge in a Chapter 13 Case.”  This is an official Form from the Court and the Court disclaims that “this information is only general…there are some exceptions…you may want to consult an attorney.”

The Court’s explanation contains three main points of information summarized below:

1-Collection of Discharged Debts Prohibited: No creditor is allowed to contact or harass you in an attempt to collect a debt that was discharged.  However, you are allowed to make voluntary payments on any discharged debt.  Normally people do this for doctors or service providers that they want to maintain relationships with.

2-Debts that are Discharged: Debts that are dischargeable in a Chapter 13 Bankruptcy usually include unsecured debts like credit cards, medical debt and personal loans not secured by property and that have not been paid in full through your Chapter 13 Bankruptcy Plan.

3-Debts that are NOT Discharged: Debts that are not discharged in a Chapter 13 Bankruptcy case usually include most secured debts, most taxes, domestic support obligations (such as child support and/or alimony), most student loans, most fines, penalties or criminal restitution obligations, reaffirmed debts, debts owed to certain pensions, profit sharing plans and other retirements plans, and all other debts that the Bankruptcy Court may specificall or texty decide are not dischargeable.

And finally, we will conclude with a discussion of what a Discharge means to your creditors, and more importantly, your credit report.

As stated above, the Bankruptcy Discharge (a Court Order) prohibits any creditors to attempt to collect on a discharged debt.  Therefore, if creditors continue to harass you after receipt of your Discharge, you will want to call or text us right away, as it is illegal.

Keep in mind that a creditor may still have the right to enforce a lien against your property after your Chapter 13 Bankruptcy has concluded and you have been discharged, if the lien was not specificall or texty listed on your Chapter 13 Bankruptcy Petition and discharged.

You Chapter 13 Bankruptcy Filing and subsequent Discharge will be reported on your credit report.  This will likely remain on your credit report for 7 to 10 years.  However, that will not stop you from rebuilding healthy credit during those years.

In my next Blog and final installment of this Chapter 13 Bankruptcy Blog Series, I will discuss what getting/having a Bankruptcy Discharge means in the next phase of your life.

Contact Attorney Theresa DeGray with any questions you may have about Chapter 13 Bankruptcy Discharges at 203-713-8877.