• 09
  • November
    2011

In our previous post, we began looking at information related to discharge in bankruptcy. Because the ultimate goal of bankruptcy is to get financial relief, the topic of discharge is an important one for our readers to get a basic handle on.

We left off saying that not all types of debts are dischargeable in bankruptcy, and that the ones which are dischargeable depend on the type of bankruptcy filed. Under the federal Bankruptcy Code, there are 19 types of debt which cannot be discharged in chapter 7, and an even more which cannot be discharged under chapter 13. It would be too much to go into all of these. The important thing to realize is that you cannot get rid of every kind of debt.

Another thing to keep in mind is that discharge can be revoked in certain circumstances. A trustee, creditor or the U.S. trustee in the case may request a revocation of the discharge in a chapter 7 case based on certain allegations against the debtor. These requests for revocation must usually be made within a year of the discharge or before the date the case closes. When these allegations are made, the court has power to determine whether they are true or false. Discharge can be revoked in a chapter 13 case when it is obtained through fraud.

Debtors should know that discharge orders are permanent statutory injunctions preventing creditors from taking any action against them. Creditors who do take action can be sanction by the bankruptcy court. Typically, violating creditors will be held in civil contempt and fined by the court.

Another part of discharge which isn't very widely known is that employers may not take action against employees solely because the employee was a debtor, was insolvent before or during the bankruptcy case, or had debt discharged. Specifically, the employer-whether a "government unit" or a private employer-may not fire; discriminate in hiring; or deny, revoke, suspend or decline to renew a license, franchise or other similar privilege. Additionally, private employers may not discriminate in hiring a debtor if such discrimination is based only on the bankruptcy filing.

As a final note, debtors are certainly able to pay off debts to creditors which have been discharged. The thing to keep in mind is that such creditors have no legal right to repayment after discharge is obtained.

Certainly, there is much more that could be said about discharge. It is one of things debtors are most interested in when filing for bankruptcy, since it is a way to gain long term relief from burdensome debt. Debtors with crippling debt do well to speak with an attorney to see how bankruptcy and discharge may apply to their situation.

Source: Online:http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/DischargeInBankruptcy.aspx; United States Courts website; gives an overview of discharge in bankruptcy.