Bankruptcy Discharge. It’s got a nice ring to it. It sounds like maybe you just get to forget about all your bills and move on, right? Well, not quite.
What Does the Term “Discharge” Mean in Chapter 7 Bankruptcy?
“Discharge” in Chapter 7 Bankruptcy refers to clearing the debtor’s (the person who filed bankruptcy) all, or most, past debts. Although most people expect that filing bankruptcy will wipe out all of their debts, that is not always the case. Chapter 7 Bakruptcy only discharges certain debtors of certain debts. The availability of discharge depends on the type of bankruptcy proceeding involved, who the debtor is, and what type of debts the debtor has.
Although a debtor is not personally liable for discharged debts, a valid lien that has not been avoided (made unenforceable) in the bankruptcy case will remain. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien. (This is another reason why it’s so important to tell your bankruptcy lawyer about ALL your debts!)
In most cases, Chapter 7 bankruptcy filers automatically receive a discharge at the end of their case. In Chapter 7, the court usually grants the discharge 60 days after the 341(a) Meeting of Creditors. Typically, this means you will obtain a discharge about four months after filing your Chapter 7 petition.
An experienced bankruptcy attorney can advise clients which debts will be discharged by a Chapter 7 bankruptcy and which debts will remain.
Which Debts Can Be Discharged in Arkansas?
Although not all debts are dischargeable, the majority of your debts will be discharged through Chapter 7, especially if you do not have any extraordinary circumstances. Among your dischargeable debt, only your debts that arose before the date of filing for Chapter 7 will be discharged. You will still be responsible for any debt you incur after filing your petition but before receiving a bankruptcy discharge.
The Bankruptcy Code lists 19 categories of debt that cannot be discharged. Everything that does not fall within these categories is dischargeable. Below is a list of the most common dischargeable debts. However, any misconduct or fraud in connection with the below categories may make them non-dischargeable.
Common Categories of Dischargeable Debt in Arkansas
- credit card charges (including overdue and late fees)
- collection agency accounts
- medical bills
- personal loans from friends, family, and employers
- utility bills (past due amounts only)
- dishonored checks (unless based on fraud)
- student loans (only in a few rare circumstances)
- repossession deficiency balances
- auto accident claims (except those involving drunk driving)
- business debts
- money owed under lease agreements (includes past due rent)
- civil court judgments (unless based on fraud)
- tax penalties and unpaid taxes past a certain number of years
- attorney fees (except child support and alimony awards)
- revolving charge accounts (except extended payment charges)
- social security overpayments, and
- veterans assistance loans and overpayments.
What are the benefits of chapter 7 discharge?
Relief from Annoying Creditors
When you file for bankruptcy, creditors must stop contacting you and trying to collect the debt. You no longer are required to pay the debt, but if you have co-debtors that did not file, they are required to pay.
Stop garnishments and Lawsuits
You can stop garnishments and pending litigation. In most cases you can request that garnishments that happened right before you filed bankruptcy be returned.