COVID-19 has placed many Americans in financial hardship. If you’re being hounded by debt collectors as you’re struggling just to survive, it may be best for you to file bankruptcy. A bankruptcy filing stops any collection efforts with an automatic stay and allows you to discharge your debts after bankruptcy.
In this article, we’ll discuss the things you need to know about bankruptcy discharge, such as which debts are dischargeable and what can cause a denial of your discharge. If you have any questions or you’re considering bankruptcy, talk to our experienced Phoenix bankruptcy attorneys.
What’s a Bankruptcy Discharge?
A discharge in bankruptcy is a court order that removes personal liability for your debt. In other words, if your debt gets discharged, you no longer have to pay for it. You can get a discharge under both Chapter 7 and Chapter 13 of the US bankruptcy code.
In a Chapter 7 liquidation case, the bankruptcy trustee sells your assets to pay off your creditors. Typically, the discharge occurs around four months after the petition is filed. At the end of the case, the court discharges any debt owed and clears you of any personal liability for them.
For Chapter 13 reorganization cases, you propose a repayment plan. Once this plan is completed and you’ve managed to make all monthly payments, the court discharges your debt. The repayment plans typically last for around 3-5 years, depending on factors such as your income.
If the court agrees to discharge your debt, it notifies your creditors of the order. No one – not an attorney, a collection agency, or a collector – can attempt to collect your debt. Nor can they file a lawsuit for the debt. The IRS can’t tax you for the wiped-out debt. However, these debts will still show up on your credit report.
With all these different options available, it may be difficult to determine what’s the best for you. An experienced bankruptcy attorney is familiar with bankruptcy law and can help you find what’s the right course of action. Schedule a free consultation with our Phoenix bankruptcy law firm now.
Can the Bankruptcy Court Deny a Bankruptcy Discharge?
There are reasons for a court to deny your discharge. Here are some reasons for this:
- Your bankruptcy case gets dismissed
- The debt is owed to a secured creditor with liens on your property (a car or a house)
- Even if your assets get liquidated through Chapter 7, it’s insufficient to repay even part of your debt;
- Perjury or fraud with your bankruptcy petition;
- Not taking the mandatory credit counseling and financial management courses;
- Transferring your assets to defraud creditors;
- Concealment of any relevant financial information; or
- Failure to abide by your court order.
Does Bankruptcy Discharge All Debt?
The court allows you to wipe out multiple types of debt in bankruptcy.
Dischargeable debts include:
- Unsecured debts
- Some debts you’ve incurred from car accidents
- Certain tax penalties
- Civil court judgments
- Past due rent
- Money due according to contract
- Judgments in lawsuits
- Past utility bills
- Business debts
- Personal loans to friends or family members
- Medical bills
- Credit card and consumer debt
Not all debts are dischargeable. There are obligations that declaring bankruptcy will not wipe out.
Debts that are not discharged from bankruptcies include:
- Debts not listed in your bankruptcy case
- Court costs
- Debts not discharged from a previous bankruptcy case
- Debts secured by liens
- Car loans
- Student loans
- Debts incurred by fraud
- Criminal fines and penalties
- Certain tax obligations
- Mortgages, co-op, condo, and homeowners’ association fees
- Child support
All bankruptcy cases are complicated. Any mistake in your petition can cause the court to deny your bankruptcy discharge. Our seasoned bankruptcy lawyers can ensure you the best chances at getting a bankruptcy discharge and wiping out your debts. Call our office today to get in touch with a skilled Phoenix bankruptcy lawyer.