Why Filing Chapter 13 Bankruptcies is Worth It: Bankruptcy Discharge

While a bankruptcy filing is not something you envision yourself getting involved in, you might want to seriously consider declaring bankruptcy for debt relief. It can help bankrupt individuals have a fresh start at life financially. Individuals who have filed a petition for bankruptcy can wipe out their debt, with some not having to pay back what they owed to certain lenders. For preliminary bankruptcy information on how to file, or if you are already planning to file for bankruptcy, read on.

Bankruptcy proceedings stay on the credit report of a debtor for several years, that is true. Rebuilding credit and getting new credit cards with a low-interest rate can be difficult. However, even if it will take time to improve your credit score after you declared bankruptcy, the pros outweigh the cons when it comes to solving your financial problems.

One of these advantages is the automatic stay, which protects you from debt collectors after filing a bankruptcy petition. This can stop the eviction, utility disconnections, wage garnishment, and even possible lawsuits. Aside from bankruptcy protection, filers also often look forward to having discharged debt, which this article will focus on.

A bankruptcy discharge is the court-ordered forgiveness of certain types of debt. This means you would not have to repay certain creditors if what you owe from them has been forgiven after you declare bankruptcy. While this is commonly associated with Bankruptcy Chapter 7 (or liquidation, since assets will be liquidated and distributed by the bankruptcy trustee), it is not exclusive to such. A discharge can also apply to individuals filing bankruptcy under Chapter 13 (or reorganization, since this bankruptcy proceeding allows you to reorganize secured debt and pay back lenders through a payment plan). 

After receiving the court order to discharge your debts, creditors cannot anymore proceed with debt collection. In a Chapter 13 bankruptcy petition, however, debtors must first make monthly payments as set out in the repayment plan. An experienced bankruptcy lawyer can explain this in more detail.

Under the relevant bankruptcy law, if you filed for bankruptcy and all paperwork are accomplished, the following could eventually be discharged:

• Credit card debt
• Unsecured debt
• Unpaid medical bills
• Certain types of tax debt
• Debts incurred as a result of an injury

In contrast, even after you file bankruptcy, the following will likely not be discharged:

• Student loans
• Criminal fines or penalties
• Other types of tax debt
• Child support and alimony
• Debt resulting from death or personal injury (DUI)

Lastly, under the bankruptcy code, the following may be discharged. That is unless the creditor requests that they be declared non-dischargeable:

• Debt from fraudulent activities
• Judgment from civil court

(Bankruptcy laws are complex and the lists above are not exhaustive).

The bankruptcy court will notify your trustee and creditors of the discharge. After this, your lender should not be contacting you for debt repayment. In some instances, a secured creditor may foreclose or repossess your personal property. Good bankruptcy attorneys can help you avoid such foreclosure or repossession.

For many people, the bankruptcy process allowed them to handle issues regarding their finances. A reliable and trusted bankruptcy attorney can assist you with the different types of bankruptcy, the actual bankruptcy procedure, and what you should look forward to after bankruptcy. Contact us at Grafton Firm, LLC for a consultation.