When your debt becomes overwhelming, because of illness, divorce, unemployment or simply poor management of your finances, filing for bankruptcy may be an option. Bankruptcy can provide you with a fresh financial start, as the court officially discharges your debt or helps make arrangements with your creditors to help reduce your payments by stretching them out over time.
Discharged Debt Definition
When your debt is discharged by a bankruptcy court, you are no longer legally required to repay the debt. When your debt as discharged, your creditors can no longer attempt to collect the money from you, either through legal action or by contacting you via phone, letters, in person or through collection agencies. However, your bankruptcy and the discharged debts will appear on your credit report for 10 years, and that may affect your ability to secure new credit accounts.
Debt That Is Not Discharged
There are some kinds of debt that are exempt from discharge orders. In general, these include child support and alimony, certain tax debts, federal student loans, fines and penalties owed to the government and certain condominium or housing cooperative fees. If you owe fines or penalties to the government, including fines for driving under the influence, those debts are not discharged either. The debts that can be discharged vary according to the type of bankruptcy you file. You are responsible to pay any debts that are not discharged by your bankruptcy filing. In addition, if there were any liens made against your property that were not made unenforceable by the bankruptcy court, you have to repay that debtor or risk losing the property.
Conditions of Discharge
The court sends a notice to your creditors notifying them that your debts have been discharged and informing the creditor that further attempts to collect the debt are illegal. Creditors usually are given the opportunity to contest the discharge of debt, but they must prove the discharge was obtained fraudulently. In some types of bankruptcy filings, you may be required to complete a course in financial management or a repayment plan before your debts are discharged. Depending on the type of bankruptcy you file, the discharge orders are issued anywhere from four months to four years after you initially file.
Revoking Discharge Orders
Although discharge orders are permanent, they can be revoked if the court discovers that you committed fraud in your bankruptcy filing. Discharge orders can be revoked if you don’t supply documents or other information the court requests during an audit of your case or if the court discovers you failed to properly report property or assets in your filing.