What is a Bankruptcy Discharge?
In most bankruptcy cases, the primary goal is a discharge. The Discharge is the fresh start the debtor gets from a successful filing. This means that the debtor is no longer personally liable for these debts.
What Debts will be Discharged in Bankruptcy?
The general rule is that all debts get discharged. The bankruptcy Code lists 19 exceptions. I won’t try to discuss them all here, but will mention a few of the most common issues that come up in a consumer case.
Debts that can never be discharged include some (but not all) taxes; debts obtained by fraud or misrepresentation (but only if the creditor files an objection, and proves fraud); child support or alimony obligations; and criminal fines and restitution. Obligations which are due under a marital agreement, or Divorce Decree (other than alimony or support) cannot be discharged in a Chapter 7 case, but can sometimes be discharged in a Chapter 13 petition. Student loans cannot be discharged unless the debtor proves that repayment would impose an “undue hardship.” The Courts have made it difficult for debtors to prove hardship, particularly where there are hardship programs available from the lending agency.
Credit Card Debt
One frequent issue concerns credit cards. In most cases, credit card debt can be discharged in Bankruptcy. There are some special rules for luxury goods or services obtained within 90 days of filing, or cash advances within 70 days of filing. If there has been a lot of recent use of a credit card, whether or not within these time periods, some credit card companies will object to the debt being discharged. If this happens, the debtor can fight the case: this is something that should be discussed with your bankruptcy attorney.
Secured Loans in Bankruptcy
Secured loans include a house with a mortgage, or a car if the creditor is holding the title. In this situation, even though the debt is discharged, the creditor retains the right to repossess or foreclose. The debtor has a number options, if he or she wants to keep the property. In a Chapter 7, if payments are current, he or she can often keep the property, continuing to make the payments. A Chapter 13 Bankruptcy provides a number of options, including submitting a plan to get caught up on a mortgage or car loan.
Can Payday Loans be discharged in Bankruptcy
Although some debt collectors claim that they are above the law, payday loans can be discharged like any other debt. In Pennsylvania, most payday lenders do not comply with Pennsylvania banking and consumer protection laws, making it unlikely that they will actually contest anything in court.
How does bankruptcy affect someone who co-signs for a loan?
The discharge only protects the debtor; a co-signer will not be discharged, unless they also have filed. Co-signing a loan means that if the original debtor doesn’t pay, you can be held responsible. In a Chapter 13 case, there is some limited protection for co-debtors, particularly in a situation where the debt is going to be paid under the plan.
Other Requirements for a BankruptcyDischarge
There are some requirements for successfully filing and completing a case. The debtor needs to file all of the necessary paperwork, and make certain that it is accurate, complete the financial management course, attend at least one hearing, and cooperate with the trustee. Failing to do these things could result in a dismissal of your case without discharge. Also, there are time limits for filing after receiving a previous discharge: if the previous case was a Chapter 7, a second Chapter 7 case cannot be filed for 8 years. The time limits are different (and somewhat shorter) if one of the cases is a Chapter 13.