What is a Chapter 7 Bankruptcy Discharge?

If you ask most people who file Chapter 7 bankruptcy, they will tell you that they never thought they would need to file for bankruptcy. Unfortunately, many people find themselves in a position where they are unable to pay their debts due to a job loss, the loss of a spouse or a prolonged medical illness. For these individuals, bankruptcy is the only real solution to their financial problem. Often they have been struggling with debt for a very long time as they tried desperately to find a solution to their financial problems and repay their debts. However, due to the recession and high unemployment rates, some individuals are just not able to repay their debts. For these individuals, filing a Chapter 7 bankruptcy can give them the relief they need from bill collectors and give them a fresh start to recover and rebuild their finances.

chapter 7 discharge

What is a Chapter 7 bankruptcy discharge?

A Chapter 7 bankruptcy discharge relieves you from your legal liability to repay most types of debts. Creditors can no longer take actions such as filing a lawsuit, hiring a collection agency or contacting you in an attempt to collect a discharged debt. The discharge is permanent and creditors that violate the discharge can face penalties imposed by the bankruptcy court. A bankruptcy discharge means an end to harassing creditor calls and threatening collection letters.

However, not all debts are subject to discharge. For example, if you have secured debts such as a mortgage or a car loan, the bankruptcy discharge will release you from the legal obligation to repay that debt; however, the creditor will retain a lien on the collateral. In other words, you must continue to pay the creditor if you want to keep the collateral that secures the loan. In some cases, you may be able to redeem the collateral by paying the creditor the market value of the collateral rather than the entire balance owed. The remaining balance would be discharged as an unsecured debt. For personal finance loans that have household goods as collateral, your attorney will file a motion to void that lien as a non-purchase security interest. What this means for you is that you are permitted to keep the household goods you used as collateral for the loan but you are not legally required to repay the debt. You can also surrender the collateral and any money owed to the creditor after it liquidates the collateral will be discharged as an unsecured debt.

Some debts are not subject to the discharge at all including alimony and child support payments. You must pay these debts even though you receive a bankruptcy discharge. Most student loans and personal taxes are also non-dischargeable; however, there are some exceptions to this general rule. An experienced bankruptcy attorney can guide you through the process of determining if you qualify for a hardship discharge for taxes or student loans.

What do I have to do to get a Chapter 7 bankruptcy discharge?

Unless a creditor or other party in interest objects to your discharge, your discharge will be granted approximately 60 days after your First Meeting of Creditors (your bankruptcy hearing). To qualify for a Chapter 7 bankruptcy discharge, you must file a bankruptcy case and meet the income requirements for a Chapter 7 case. You cannot have received a discharge under a previous Chapter 7 case within eight years or a Chapter 13 case within six years. You must also complete a required credit counseling course prior to filing your Chapter 7 bankruptcy case and complete a financial management course before the deadline set in your case. After the deadline for creditors to object has expired, the clerk of court will issue the discharge order and serve a copy on all creditors in your case, you and your attorney.

How can a Chapter 7 bankruptcy discharge help me?

A Chapter 7 bankruptcy discharge will help you by eliminating your unsecured debt and relieving you of the legal responsibility to repay those debts. Because you are no longer under the burden of debt caused by credit cards, medical bills and personal loans, you are able to continue making your house payments to keep your home and your car payments to keep your transportation to and from work. The bankruptcy discharge allows you to reorganize your finances so that you can begin to save money for your retirement and provide for the needs of your family.

A Chapter 7 bankruptcy discharge prohibits creditors from harassing you or filing a lawsuit to collect the debt. It relieves you from the stress you have been under due to financial problems. Stress from financial problems can cause serious health issues; therefore, a bankruptcy discharge can help you live a healthier and happier life free from the burden of debt that you have been living under. Contact an experienced bankruptcy attorney today to discuss how filing a Chapter 7 bankruptcy can relieve your debt problems and help you have a stronger financial future.