What Is the Difference Between a Bankruptcy Discharge and Suspense?
At a time when jobless claims seem higher than normal, some people find it very difficult to afford their debts. When the economy is booming, people often make purchases that they feel they can afford, only to be hit with a surprise termination from their work. Sometimes the only choice at that point is to declare bankruptcy. It is important to understand the legal processes that take place during this period.
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Bankruptcy Suspense
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When you file for bankruptcy and the court approves the petition, it will issue an automatic stay that disallows, or suspends, any creditor from repossessing or foreclosing on property or otherwise attempting to collect your debts. During this suspension period, the court and any professionals necessary, such as an attorney or trustee, work to reorganize your debts. The priority is to pay as much of the debt as possible and discharge what you cannot eventually pay.
Suspense Account
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In accounting, a suspense account is one in the general ledger that the accountant or bookkeeper uses to list a transaction temporarily. Sometimes it is difficult to immediately ascertain in which account to record a transaction, such as when a company goes bankrupt. The bookkeeper might not immediately know whether to record a liability that the bankrupt company owes as a bad debt or whether the liquidation of assets might enable payment. During the bankruptcy process, the bookkeeper may list the transaction in the suspense account until further notice from the bankrupt company. A trustee suspense account, however, is an account that a trustee uses in Chapter 13 bankruptcy to hold the assets of the person going bankrupt until the reorganization of your debt is complete and the trustee sees fit to issue payments.
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Bankruptcy Discharge
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A bankruptcy discharge relieves the debtor from paying debts that he owes to certain creditors. After the court issues an order to discharge a debt, the creditor may not contact you further, unless there is a lien on your property, to try to obtain payment. The timing and amount of the discharge depend upon what type of bankruptcy you file for. The court typically sets a date by which the creditor must object to the discharge if you file for Chapter 7 bankruptcy. The Bankruptcy Code permits the courts to discharge only certain types of debts.
Main Differences
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The main difference between a bankruptcy suspense and a bankruptcy discharge is the finality of the discharge. A suspension only means that the creditors are put on hold as the courts and the debtor work to come up with the most beneficial solution to all parties. Eventually, the courts will decide that you can pay these debts and come up with a payment plan or the judge will decide that you cannot pay the debts and issue an order to discharge them.
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