What Are the Penalties If Bankruptcy Is Not Discharged?
When you file a petition for bankruptcy protection, your creditors are no longer allowed to contact you by mail, phone or by any other method. After your bankruptcy filing has been completed, your debts are discharged, which means creditors must continue to comply by not contacting you for further collection activity. If your debts are not discharged, then creditors can pursue certain remedies related to your debt. Some debts cannot be discharged, such as child support or money owed to the Internal Revenue Service.
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Collection Activity
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If a discharge of debtors notice is not granted to a consumer concerning a certain debt, the creditor has the right to continue with collection activities. Without a discharge of debtors notice in place, it's as though a debtor never filed a petition for bankruptcy. A creditor can seek legal action through a court of law and acquire a judgment. Once a judgment has been obtained, creditors have many options at their disposal, including garnishing wages or attaching a bank account. In some states, a creditor can even attach a lien to real estate property.
Wage Garnishment
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Garnishments normally take money out of your pay check at an amount equal to 25 percent of your disposable income. Each state has rules and regulations in place pertaining to garnishment of wages.
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Bank Levy
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If a creditor seeks a bank levy after a judgment, they are allowed to attach the bank account of a debtor and all or a portion of the money in the checking account is unavailable to the debtor. The money secured by the levy will be applied to the debt owed.
Lien
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If a lien is placed on real estate property, the lien will be paid when the home is refinanced or sold. The proceeds from the sale will pay off the lien. This is not the quickest way for a creditor to collect on a debt, but it is effective over time. When the home is in the process of being sold, a title search is done to see whether any liens or judgments are attached.
Secured Creditors
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If there are debts that have been discharged and they are secured, the creditor can still go after the security, such as an automobile loan. If the debtor wishes to keep the auto, he must continue to make payments. Most of the time a reaffirmation agreement is signed that reinstates the debt. This type of agreement is usually filed with the bankruptcy court.
Non-Dischargeable Debts
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Debts that are normally not discharged include government-backed student loans, taxes, or money used to pay non-dischargeable debts, alimony, debts incurred as a result of driving under the influence and any debts incurred as a result of fraudulent activities or embezzlement.
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