What is a bankruptcy discharge and what debt is dischargeable?
A bankruptcy discharge eliminates most debt. Creditors cannot take any action to collect discharged debt. When secured debts such as mortgages or car loans are discharged, the creditor cannot take any further action to collect, however, unless the lien is avoided, the property will likely be repossessed or foreclosed. In a typical Chapter 7 case, the discharge happens three to four months after filing. In a Chapter 13 bankruptcy, this will occur shortly after the payment plan is completed.
Non-dischargeable debts include:
- certain types of tax claims
- debts not included in the filing (it's important to remember to include all of your debt)
- debts for spousal support, child support, or alimony
- debts for willful and malicious injuries to person or property
- fines and penalties to government entities
- most student loan debt (a separate action can be taken if the debtor can prove undue hardship)
- debts for personal injury caused by the debtor's operation of a motor vehicle while intoxicated
- debts owed to certain tax-advantaged retirement plans
- post-petition condo or homeowner's association fees or dues
- debts resulting from fraud are not dischargeable if the creditor is successful in proving to the court that the debt is fraud-related
Debts dischargeable in a 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
Denial of discharge
If a Chapter 13 plan is not completed, the debtor will not receive a discharge. In a Chapter 7 case, an objection to discharge may be raised by the trustee in the case, the U.S. trustee, or a creditor through an "adversary proceeding." Reasons to deny discharge include:
- failure to provide requested tax documents
- failure to complete a course on personal financial management
- transfer or concealment of property with 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
- if the debtor received a discharge in a previous Chapter 7 or 11 within eight years
- if the debtor received a discharge in a previous Chapter 12 or 13 within six years (with exceptions)
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