Insight On a Chapter 7 Bankruptcy Discharge

When first inquiring for filing bankruptcy, one can be easily discouraged due to the complexity of the legal terms used, one of which is a discharge. You will see the word discharge mentioned several times, be it on a website or during your conversation with your attorney. Exactly what is a Chapter 7 bankruptcy discharge? What does it do?

When you decide to pursue a Chapter 7 bankruptcy, you are essentially asking the Court to eliminate your debt and give you a fresh financial start.  If you are successful in your Chapter 7 bankruptcy filing, the Court will grant you a discharge, which means that the majority of your unsecured debt will be eliminated. You will not be required to pay it back, ever. It has been discharged.

Debts That Can Be Discharged In A Chapter 7 Bankruptcy

Generally, under a Chapter 7 bankruptcy, most unsecured debt can be eliminated. Unsecured debt, by definition is debt without any property pledged as security for the repayment of the debt.  Some examples of unsecured debt include credit card debt, utility bills and medical bills, as well as any remaining balances on foreclosed homes and repossessed vehicles. In some instances, some debt that may appear secured are treated as unsecured debt during a bankruptcy filing. For example, if a lender requires you make a list of your assets such a TV, furniture,ect, these assets can be protected during a bankruptcy filing by filing a motion. Exactly which assets can be protected during a bankruptcy filing vary from state to state. It is best to consult with your attorney in order to determine what assets can be protected in your state.

Debts That Cannot Be Discharged In A Chapter 7 Bankruptcy

It is important to note that while a Chapter 7 bankruptcy can eliminate most unsecured debt, there are still some unsecured debt that has to be paid back. These include student loans, child support, alimony, debts owed to government such as  the overpayment of government benefits and parking tickets. In addition, any loans acquired by providing false information to a creditor will not be discharged.

What Happens If A Creditor Seeks Payment On A Debt That Has Been Discharged?

After these debts have been discharged, creditors are prohibited by law from seeking payment. If a creditor does seek payment on a debt that was discharged in a Chapter 7 bankruptcy, not only is it a violation of the discharge injunction,  but also the FDCPA and other consumer protection laws, and you may be entitled to claim damages.

Secured Debt In A Chapter 7 Bankruptcy

A Chapter 7 bankruptcy, to a certain extent, can also help you eliminate secured debt. Secure debt is any debt which was obtained by providing an asset as collateral. For example, a mortgage or a car loan. If you default on the debt, the lender can seize your home or a your car.  If you are willing to lose your collateral, then these debts can also be discharged.

A Chapter 7 bankruptcy discharge can be a very powerful force that will enable you to wipe out almost all of your debt. Since each situation is unique, it is recommended to consult with an attorney to determine exactly what debt can be eliminated  when you are granted a Chapter 7 bankruptcy discharge.