What Does It Mean When Debts Are Discharged In A Chapter 7?

A chapter 7 discharge happens when someone files their petition for chapter 7 bankruptcy and includes a list of all of their creditors. At the end of the bankruptcy when the required period of time for the creditors to object has passed, the judge signs a discharge order which means all of the debts that are listed in the petition are discharged. The discharge means that they are forgiven, so the person would not owe them money anymore. The person would not have the debt any longer so it is a good and legal term for basically having their debt wiped out.

How Does Someone Go About Obtaining A Chapter 7 Discharge?

A person would first have to file their petition, which is a pretty involved process. They will have to include a budget list, income and a list of all of their creditors. Their social security number, name, previous addresses and other information would go into the petition, which is 30 to 40 pages long, and they would have an attorney file it with the court. This starts the process. After the petition is filed, the person will have a short meeting with the creditors. There is a three month time period after that meeting during which the creditors have the opportunity to object to the bankruptcy, which they usually don’t do as long as everything is handled the right way. The reasons they would object would be if they had reason to suspect that the person was committing fraud, hiding some assets or that particular debts were non-dischargeable. There are generally no objections during this time period, but the law allows three months so after that time period has passed, the judge enters a discharge order, which is how the person gets a discharge. The process takes about four months from the time the petition is filed.

What Types Of Debt Are Not Dischargeable In A Chapter 7?

Almost everything is dischargeable, but there are a few things that are not. The most common one that people have a problem with is student loans, which are technically dischargeable, but it is very difficult to get them discharged, so it is almost as if they were non-dischargeable. A person with student loans should probably plan on not having them discharged. Certain tax debts are also not dischargeable, along with a couple of other things like restitution or criminal restitution if a crime had been committed and the court ordered the person to pay restitution. Child support or alimony is also not dischargeable.

How Does A Chapter 7 Discharge Affect The Liability Of Co-Signers Or Other Parties Who May Be Liable To A Creditor On A Discharged Debt?

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It can get messy. This is one of those things that I always talk to my clients about to make sure we know if there is somebody who is a cosigner on any of their debts. When someone files a chapter 7 bankruptcy, their debts will be discharged, but the debts of the person who is a cosigner with that person will not be discharged. If someone was a cosigner on a mortgage, and if one spouse filed bankruptcy but the other did not, then the spouse who did not file bankruptcy will have sole personal liability for that debt. It can cause problems if a person wanted to refinance or if the other party did not have the means to pay the debt. It can cause a house to go to foreclosure so it can get a little rocky. The bottom line is that one person’s debt is discharged but the other person’s is not, so it’s just like removing one person as a cosigner.

What Happens When A Creditor Tries To Collect A Debt That Was Already Discharged In The Chapter 7 Case?

Usually, a person can give the creditors a week or two to make sure they have received the notice after filing a petition. Creditors can get in a lot of trouble if they continue to contact the person after having received the notice, so that is something that a person should call their lawyer about and let them know. It is possible they could be penalized by the court and the person could actually receive damages for them trying to contact them in violation of the stay. It is a very serious matter for them to try to continue to collect debts because they are basically ignoring the bankruptcy court. It is something that is serious but something that creditors rarely do. Usually when it does happen it is an honest mistake and it is from somebody who did not receive a notice so as soon as they get the notice, they stop contacting the person right away.

How Is Someone Going To Be Notified When Their Discharge Has Been Granted?

The person will get a letter from the court in the mail, but I always send the notice to my clients when I find out that there been a discharge, just to make sure that they get it. The letter in the mail from the court will state that it is a notice of discharge, and that would be it. They receive a copy of the official order that the judge sent out, which is the same thing that the creditors get to notify them that they can no longer collect their debt from that person.

What If Someone Wishes To Repay The Dischargeable Debt?

A person can do that if they want to. There is nothing in the law that says a person cannot repay somebody a debt that has been discharged. The discharge means that the creditors cannot collect from that person, and that the person does not owe anything, legally speaking. It also means that it will not be on the credit report. This is not something that a person can get a judgment for or anything like that, but if the person wanted to pay it back, then they absolutely could. Some people have done that in the past, so this does happen.

For more information on Discharge Of Debts, a free initial consultation is your best next step. Get the information and legal answers you’re seeking by calling (801) 441-2013 today.

By Court Koehler

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