What is a Discharge of Debt?

Dollar billIn a Chapter 7 or a Chapter 13 proceeding, a debtor may seek the “discharge” of debt. What does that mean and what doesn’t it mean? This blog post looks at what you can expect from a discharge in bankruptcy.

Fundamentally, a discharge means that you, as a debtor, are relieved of any personal liability for the debt. Your creditors can no longer file a lawsuit against you or take any legal action to compel you to pay a debt. There are, however, some caveats:

  • A discharge does not mean that you cannot make payments to a creditor. For example, if you have a personal loan from a relative, and you have it discharged in bankruptcy, you no longer have a legal obligation to pay the loan off, but you can choose to do so.
  • A discharge only relieves you from liability for a debt. It has no impact on liens and encumbrances, such as mortgages. Accordingly, even though a mortgage lender cannot seek to collect money owed on a mortgage, the lender can still foreclose under the terms of the mortgage. The same principle applies to other types of secured debts, including automobile
    loans. Even though the lender may not take legal action to recover the debt, the lender may repossess property pledged as collateral
  • The discharge does not necessarily end your bankruptcy petition The case may continue, even though certain debts have been discharged, as the trustee acquires and sells other assets that can be sold to satisfy creditors.
  • The discharge will end the automatic stay—When you file for bankruptcy protection, an automatic stay immediately goes into effect, preventing creditors from calling, writing, or taking any other action to collect a debt, other than through the bankruptcy proceeding. Once your discharge has been granted, the stay is lifted, to that any debts not included in the discharge may now be collected.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know that the bankruptcy process can be intimidating and confusing. We offer a free initial consultation to every client. For an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

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