What is a Bankruptcy Discharge?

Unless for some reason a general discharge of debts is denied, the Court typically enters an order which grants a discharge to the person(s) named as the debtor(s). A discharge in bankruptcy eliminates a debtor’s legal obligation to pay debts that are discharged.

The granting of a discharge is not a dismissal of the case and does not determine how much money, if any, the trustee will pay to creditors. Moreover,  it does not always automatically result in the closing of a case. All contested matters, if any, must be resolved, and the appointed trustee must file a Final Report and Account and request entry of a Final Decree before the Clerk’s Office will close the case.

The discharge is a permanent injunction which bars any attempt to collect from the debtor all debts that have been discharged, except for debts not discharged by the court. For example, a creditor is not permitted to contact a debtor by mail, phone, or otherwise, to file or continue a lawsuit, to attach wages or other property, or to take any other action to collect a discharged debt from the debtor. There are also special rules that protect certain community property owned by the debtor’s spouse, even if that spouse did not file a bankruptcy case. A creditor who violates this order can be held in contempt of court and required to pay damages and attorney fees to the debtor. However, even if a debt is discharged, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the collateral after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case.

Most, but not all, types of debts are discharged if the debt existed on the date the bankruptcy case was filed. If the case was begun under one chapter of the Bankruptcy Code and then converted to a different chapter, the discharge applies to the debts owed when the bankruptcy case was converted.

In a Chapter 7 case, the discharge is typically entered within 75 days after the §341(a) meeting of creditors. In a Chapter 13 case, the discharge is typically entered upon the request of the Trustee following the completion of the debtor’s plan payments. Even if a debtor has the legal right to discharge a debt, the debtor can voluntarily repay the debt, formally reaffirm the debt, or redeem collateral which secures a debt.