Posen Bankruptcy Lawyer Examines The Bankruptcy Discharge

Debtors are often confused by just how bankruptcy helps them.  Some think that the government pays off their bills – which it doesn’t.  A debtor who successfully goes through bankruptcy receives a discharge.  The discharge is a court order that wipes out or forgives certain debts.  Not every debt is dischargeable.
In a chapter 7 case, the debtor lists her debts on three different schedules depending on the nature of the debt.  Creditors have sixty days after the first meeting of creditors to contest the dischargeability of the debts owed to them.  If they fail to do anything by the deadline, those debts that are not statutorily non-dischargeable are discharged by the court.  The court issues a general discharge that the debtor may send to creditors should they contact the debtor.  In the event the creditor doesn’t abide by the discharge order, the debtor may seek sanctions against the creditor from the Bankruptcy Court for violation of her rights under the discharge.
Creditors do have a right to challenge the dischargeability of their debts.  The Bankruptcy Code sets forth certain exceptions to discharge that allow creditors to seek recourse from the bankruptcy court.  If the creditor successfully challenges the debt owed to it, the debt becomes non-dischargeable, meaning it isn’t subject to the debtor’s discharge, and the debtor owes the debt in perpetuity.
In a chapter 13 case, the situation is slightly different.  Creditors have ninety days after the meeting of creditors to file claims.  Although the debtors’ plans control, if a creditor doesn’t file a claim before the claims deadline, the debt is an otherwise dischargeable debt and the debtor successfully completes his plan, the debt is discharged as if it had been filed.  Furthermore, debtors may propose to pay unsecured creditors as little as ten percent of their claims.  If the debtors’ proposed plan calling for ten percent payment to unsecured creditors is confirmed or approved by the bankruptcy court, the remaining ninety percent of the claim is discharged.  This is called the super discharge and is peculiar to chapter 13 only.
There are certain debts that are non-dischargeable regardless of the chapter under which the debtor files.  Furthermore, certain debts such as mortgages, certain taxes, student loans and the like can be paid through the chapter 13 plan but are unlikely to be discharged at the end of the case.

See also, Posen Bankruptcy Lawyer or call directly (847) 520-8100 and ask to speak with David Siegel.