In the bankruptcy process, a discharge means that a financial obligation for which you are legally responsible cannot be legally enforced against you any longer.
A discharge is a fresh start, and it is the fundamental goal of the bankruptcy system. As the Supreme Court stated in Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934) "[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt."
It is important to note that bankruptcy only affects legal obligations. One of the most common questions clients have is whether they can still pay back a family member or friend who has lent them money due to the hard times they are facing.
The answer is yes, with some limitations. You can choose to repay any creditor after a successful bankruptcy, but you are released from any personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts.
In a Chapter 7 bankruptcy, the discharge takes effect when the Judge issues an order at the end of the case granting the discharge. In a Chapter 13 case, the discharge is entered after you have completed the Chapter 13 repayment plan by making all of the Trustee payments.
If you seek to have a secured debt discharged, such as a mortgage or car loan, then the creditor will take back the car or house through a repossession or foreclosure. If you want to keep these items, then you must arrange with the lender to keep making the payments. To explain how this works, consult an attorney.
Some kinds of debt cannot be discharged. Examples include criminal fines, child support, student loans, and tax debts. There are limited exceptions, but in practical terms these debts will not be discharged. But credit cards, lines of credit, medical debt, and most other kinds of bills are discharged, and you will not have to repay them.
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