WHAT IS A BANKRUPTCY DISCHARGE?

For individual consumer debtors, generally, the goal of filing bankruptcy is to receive a discharge of debts. Successful completion of a bankruptcy results in a court order that discharges debts. Once a debt is discharged, the creditor is prevented from attempting to collect on that account from the debtor.

Generally, a discharge order in a chapter 7 bankruptcy protects the debtor from collection of all debts except those for taxes, student loans, child and family support, divorce court ordered obligations, and fines and penalties. A chapter 13 discharge will relieve the debtor of some divorce court ordered obligations, as well as the unpaid balance of debt not paid through plan payments.

A bankruptcy discharge also relieves the debtor of personal responsibility for payment of debts secured by a home or car. The debtor may continue to own and occupy the home, so long as payments are made and other terms of the mortgage are met. The debtor may also continue to own and drive the car, but may be required to reaffirm the loan.

The bankruptcy discharge is the key to receiving the “fresh start” that is the reason for bankruptcy.

For further information on frequently asked questions, you can check out our FAQ page at http://www.cobk.com.