At the end of your bankruptcy, you get a discharge – a court order that relieves you from your obligation to pay your debts. You get a discharge at the end of your Chapter 7 or Chapter 13 bankruptcy only after completing all of the requirements for your case. The benefit of a discharge is that your creditor can never take action to collect that debt again. No more calls, letters, or lawsuits over discharged debts.
What debts get discharged?
After completing the Chapter 7 or Chapter 13 bankruptcy, most of the unsecured debts that remain unpaid will get discharged. Debts that are likely to be discharged in bankruptcy include credit card debts, medical bills, lawsuit judgments, personal loans, obligations under a lease or other contract, and other unsecured debts.
There are some types of debt. However, that cannot be discharged in either type of bankruptcy. These can include domestic support debts (child support or alimony), fines and penalties from criminal activity, most student loans, and debts not included on your bankruptcy. Is some situations you can discharge tax debts and student loans, but it requires filing a separate lawsuit inside of the bankruptcy case.
When do debts get discharged?
Discharge for a Chapter 7 bankruptcy usually occurs about 4 months after filing for bankruptcy. In a Chapter 13 bankruptcy, the remaining debt not paid in the course of your bankruptcy will be discharged after all of your plan payments have been made and you have completed all other requirements. If you don’t take the required second bankruptcy course, the bankruptcy court could deny your bankruptcy discharge.
The End of a “No Asset” Chapter 7 Case
In most Chapter 7 cases, all of the debtor’s assets are exempt, which means nothing will be paid to the trustee and the trustee will not take any property to pay creditors. This is a no-asset Chapter 7. It what everyone wants, you do not have to pay anything or lose anything. To learn more about which assets are exempt, see Link to exemptions blog
In a no asset bankruptcy case, the trustee files a report after the creditor meeting (link to creditor meeting) stating there are no assets, then the court enters the discharge order. Then, in most cases, the court enters an order closing the case. At this point, the case is no longer active.
The End of an “Asset” Chapter 7 Case
In some cases, the debtor will have non-exempt assets that the trustee will have to manage and sell. The process of gathering and selling assets can take months or years. The trustee may have to file lawsuits against creditors or others, or sell assets like real estate, vehicles or businesses.
Creditors in an asset case will get notice and file claims in the bankruptcy case. The trustee will file objections with the court to any claim that is deficient or improper and the court will hold hearings on the objections. When the claims are resolved, the trustee then mails checks to those creditors whose claims have been allowed by the court. That process may also take months or years.
When the non-exempt the assets have been gathered and liquidated (sold for cash), all the claims have been filed and resolved, and funds have been distributed, the trustee will file a report with the court. Only then will the court close the case.
What about debt with cosigners?
While your liability for debt is removed upon bankruptcy discharge, the cosigner is on the hook for the entire balance of the debt. Your bankruptcy protection does not extend to your joint applicants or cosigners. Creditors are still allowed to collect from (or even sue) the cosigner for the debt. However, you can voluntarily make payments on the debt to ensure that it’s paid in full, especially if you received the benefit from the debt.
What should I do after I get my discharge?
Check your credit report. Get them only in writing from annualcreditreport.com and use the mail in form available at that site to obtain the credit reports from all three credit reporting agencies (Equifax, Experian and Trans Union). The form to get all 3 credit reports is located here. Attach a copy of your driver’s license and utility or other bill that ties you to the address you want the credit reports mailed to and so you can show that you are who you say you are. This is the absolute best way to get your free credit reports when you want to dispute erroneous information and it avoids many problems.
You may think it easier to get them from the bureaus, but DO NOT get the credit reports directly from the credit reporting agencies (Equifax, Experian and Trans Union) or you may lose important rights due to binding arbitration agreements. If they have incorrect information on your credit report you can sue and get paid, but not if you click something on their website and agree to binding arbitration.
If there is anything incorrect on your credit report, bring it to us and we can help you fix it. Click now to contact a bankruptcy lawyer in North Little Rock.