What Is A Bankruptcy Discharge And Who Gets One?

If you are planning to file for bankruptcy, you have likely heard of the term “bankruptcy discharge.” You may have some idea about how a discharge works, and what it means for your debt. However, it is important to know that the bankruptcy discharge is different depending upon the type of bankruptcy that the debtor files for, as well as the type of debtor. To be sure, discharges do not apply to businesses that file for bankruptcy in the same way that they apply to individuals or consumers who file for bankruptcy. What is a discharge and how does it work? Consider the following information from our West Palm Beach bankruptcy lawyers.

Defining a Bankruptcy Discharge 

According to the U.S. Courts, a bankruptcy discharge “releases the debtor from personal liability for certain specified types of debts.” To be clear, the bankruptcy discharge is what results in the debtor no longer being liable for any debts that are eligible for discharge, which means that the debtor will no longer be required to make payments on those debts. It is important to know that the discharge is permanent, and once debts are discharged, the debtor will not be responsible for those debts and cannot be legally contacted by creditors seeking to recover the debt. Although creditors or debt collectors might still make contact in an attempt to collect debts, the debtor may have some recourse.

The Consumer Financial Protection Bureau (CFPB) clarifies that “debt collectors cannot try to collect on debts that were discharged in bankruptcy,” and doing so could be a violation of the Fair Debt Collection Practices Act (FDCPA).

Discharges Occur at Different Points Depending Upon the Type of Bankruptcy 

The timing of your bankruptcy discharge will depend upon the type of bankruptcy you have filed for in West Palm Beach. In Chapter 7 bankruptcy cases, which are liquidation bankruptcies, the debtor will typically receive a bankruptcy discharge 60 days following the 341 meeting of creditors, or about four months after the debtor has filed the bankruptcy petition.

In Chapter 11 and Chapter 13 bankruptcy cases, which are reorganization bankruptcies, the debtor will receive a discharge “as soon as practicable after the debtor completes all payments under the plan.” Most consumers who file for a reorganization bankruptcy will file under Chapter 13, which means that debts will be discharged anywhere from three to five years after filing the bankruptcy petition, which is the typical length of the repayment plan.

Businesses Do Not Receive Discharges in Chapter 7 Cases

 One of the primary benefits of a liquidation bankruptcy under Chapter 7 is that the debtor can receive a discharge. However, if you are a business that is planning to file for Chapter 7 bankruptcy, you should know that businesses do not receive discharges like individuals do. Instead, the business closes and there is no longer an entity that can be liable for debts.

Contact a West Palm Beach Bankruptcy Attorney 

Do you have questions about how your debt will be handled in the bankruptcy process, or questions about the bankruptcy discharge? One of the West Palm Beach bankruptcy attorneys at Kelley Kaplan & Eller can help.

Sources:

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/discharge-bankruptcy-bankruptcy-basics

consumerfinance.gov/ask-cfpb/can-a-debt-collector-try-to-collect-on-a-debt-that-was-discharged-in-bankruptcy-en-1425/