Bankruptcy has long-term financial consequences for those who elect to file. Typically, people file bankruptcy when their finances have overwhelmed them; a divorce, health scare or job loss may create the necessity for filing bankruptcy. While debtors who file bankruptcy will take a significant hit on their credit history, in many cases, Chapter 7 or Chapter 13 bankruptcy is seen as the only option available to them. What many people do not understand is what the standard is for a bankruptcy discharge.
What is a Bankruptcy Discharge?
The U.S. Bankruptcy court defines a discharge as “…discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged.” The Chapter of the bankruptcy code which you use will impact when this discharge occurs.
Chapter 7 Bankruptcy Discharge
Chapter 7 eliminates most unsecured debt. This means that upon discharge, you will no longer be obligated to pay credit card debts, medical bills and certain other bills which the court has approved as part of your petition. The court sets two deadlines for creditors; the first is the deadline to file a complaint objecting to discharge and the second is 60 days following the creditors meeting. If these time periods have been met and you, the debtor have completed the required counseling courses the court will grant a discharge. In general, this will be three to four months after you filed Chapter 7 bankruptcy.
Chapter 13 Bankruptcy Discharge
Chapter 13 bankruptcy is very different from Chapter 7. Chapter 13 is called “wage earners” bankruptcy and you, as the debtor working with your attorney have presented the court a plan to repay your debts. Some creditors will not be paid the full amount they are owed; the plan could last as few as three years and as many as five years. Only after the payment plan is complete will you receive a discharge of a Chapter 13 bankruptcy. At that time, all creditors who were not paid the full amount will also receive a copy of the discharge; they cannot legally pursue additional payment after discharge. Those who file Chapter 13 also have to complete counseling courses before their bankruptcy is discharged. Generally speaking, most Chapter 13 plans are discharged four years after filing.
Thousands of bankruptcy petitions were filed in CA during 2015 and it is important to understand this does not mean you have failed in some way. Bankruptcy is designed to help debtors get a fresh financial start. If you’re considering filing bankruptcy, contact the Law Offices of James C. Shields at 310-540-6792.