The Debt Discharge in Bankruptcy FAQ

By Christie Nicholson, J.D. | Legally reviewed by FindLaw Staff | Last reviewed September 16, 2024

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If you're drowning in debt, filing bankruptcy may seem like the answer. But there's no guarantee that the bankruptcy court will discharge all your debts. For example, did you know that student loans are generally nondischargeable? Without showing undue hardship, which is usually not easy to show, your student loans will generally survive your bankruptcy.

Another issue is that the bankruptcy trustee may find that you make too much money and don't pass the Chapter 7 means test. If this happens, you may have to file a Chapter 13 bankruptcy.

Here, we'll answer common bankruptcy FAQs. This will help you decide whether bankruptcy is a viable solution for you. If you still have questions about whether bankruptcy will provide debt relief, contact a bankruptcy lawyer near you. Even if your questions get answered, contacting a bankruptcy attorney before filing is a good idea.

What Is a 'Discharge' in Bankruptcy?

A bankruptcy discharge releases a debtor from personal liability for specific types of debts. After discharge, you no longer have to pay that debt, with some exceptions. You can get a discharge for secured and unsecured debts.

Chapter 7 bankruptcy discharge is a permanent court order banning lenders from taking collection action on debts included in your bankruptcy petition. This includes hiring debt collectors, filing suit, and contacting debtors via telephone, letters, and email.

When we speak of bankruptcy discharge shortly after filing bankruptcy, we generally mean debts in a Chapter 7 bankruptcy case. With the other type of consumer bankruptcy, Chapter 13, you must repay some or all your debt. It isn't until you complete your repayment plan that the court will discharge any debts.

Although you are not personally liable for discharged debts, that doesn't mean you are out of the woods. Some debts survive a bankruptcy filing. For instance, you'll still have to pay valid liens and judgments that survive the bankruptcy. Secured creditors can still enforce liens post-bankruptcy.

When Does the Discharge Happen?

The bankruptcy process can take time. It's not just a matter of filing paperwork with the court. Depending on the type of bankruptcy case you file, it may take months or even a year to resolve.

So, the timing of your bankruptcy discharge varies. In a Chapter 7 bankruptcy case, the court usually grants the discharge promptly after:

  • The time limit for creditors to object to bankruptcy has passed
  • The deadline for creditors to file a motion to dismiss your case for substantial abuse has passed

In most cases, your creditors have 60 days from the First Meeting of Creditors to file a motion to dismiss your bankruptcy case.

Typically, the court will resolve your Chapter 7 bankruptcy case within four months. Of course, some cases take much longer. If the trustee has to investigate your assets, it may delay your discharge. The same thing may happen if your creditors challenge your ability to include their debts in your bankruptcy petition.

In the other types of bankruptcy cases, Chapter 11, Chapter 12, and Chapter 13, the courts generally grant the discharge as soon as practicable after the debtor completes all payments under the plan. Since a Chapter 12 or Chapter 13 plan may involve a three-to-five-year repayment plan, the discharge typically happens as soon as practicable after all payments get made under the plan.

The court may deny a debtor's discharge in Chapter 7 or 13 cases unless they complete both a pre-bankruptcy credit counseling class and a pre-discharge debt management course.

The Bankruptcy Code has limited exceptions to the financial management rule. If the U.S. trustee or bankruptcy administrator determines inadequate educational programs are available, they may waive the financial management component. This can also happen if the debtor is disabled, incapacitated, or on active military duty in a combat zone.

How Does the Debtor Get a Discharge?

In most bankruptcy cases, the debtor gets their discharge automatically. The Federal Rules of Bankruptcy Procedure direct the bankruptcy court clerk to mail a copy of the "Order of Discharge" to all creditors, the U.S. trustee, the trustee in the case, and the trustee's attorney, if any.

The debtor and their bankruptcy attorney also get copies of the discharge order. The notice does not explicitly list the debts the court has discharged. It simply informs creditors that the court has discharged the debts the petitioner owed them, and they can't attempt further debt collection.

The Order of Discharge also notifies creditors that further collection efforts could subject them to punishment for contempt.

Does the Court Discharge All Debts?

No. The Bankruptcy Code says specific categories of debts are not dischargeable. Debtors must repay these debts after their bankruptcy is complete.

Congress determined that certain debts are not dischargeable for public policy reasons. For example, if a debtor owes criminal restitution for a drunken driving accident, it wouldn't be fair to discharge this debt in bankruptcy.

There are 19 categories of nondischargeable debt. These exemptions apply to all types of bankruptcy cases. The most common types include:

  • Tax debts unless they're old tax debts
  • Debts the filer omits from their schedule
  • Child support and alimony
  • Debts for willful and malicious injuries
  • Debts owed to the government (i.e., fines and penalties)
  • Student loans with undue hardship exception
  • Debts for personal injury caused by a DUI crash
  • Retirement plan withdrawal penalties

Some debts are not dischargeable in a Chapter 7 case but are dischargeable in Chapter 13. These include:

  • Willful and malicious injury to property
  • Tax debts
  • Debts arising from divorce property settlements

A Chapter 13 debtor doesn't get a discharge until they complete their repayment plan. Sometimes, you can request a "hardship discharge," although these are rare.

Can Creditors Object to a Discharge?

There is no such thing as a right to discharge in a Chapter 7 bankruptcy case. Creditors and U.S. trustees can file an objection to discharge. When you file bankruptcy, a notice gets sent to your creditors, alerting them to a deadline for filing an objection.

To object to the debtor's discharge, a creditor must file a complaint with the bankruptcy court before the deadline. Once they file their objections, the court will hold an "adversary proceeding." There, the creditors will make their arguments against discharge. The debtor's bankruptcy attorney will have a chance to respond.

The court may deny a Chapter 7 discharge for any of the reasons described in section 727(a) of the Bankruptcy Code, including:

  • Failure to provide tax records
  • Failure to complete a personal financial management class
  • Transferring or concealing property and assets with the intent to hinder, delay, or defraud creditors
  • Destroying or hiding financial records
  • Perjury and other fraudulent acts
  • Failure to account for the loss of assets
  • Violation of a court order

The creditor has the burden of proving their case.

Unlike Chapter 7, creditors do not have standing to object to discharge in Chapter 12 or Chapter 13. Creditors can object to the trustee's repayment plan but can't object to the discharge of the debt once the debtor completes their repayment plan.

Can the Bankruptcy Court Revoke a Discharge?

The bankruptcy courts rarely revoke a debtor's discharge. But, there are situations in which this may happen. For example, a trustee or creditor may request that the court revoke the debtor's discharge in a Chapter 7 case based on allegations that the debtor:

  • Committed fraud
  • Failed to disclose assets
  • Committed one of several acts of impropriety described in section 727(a)(6) of the Bankruptcy Code
  • Was unable to explain misstatements the trustee discovered in an audit
  • Failed to cooperate with an audit

Typically, a creditor or trustee must file their revocation request within one year of discharge. The court will decide whether such allegations are true and, if so, whether to revoke the discharge.

In Chapters 11, 12, and 13, if fraud gets confirmation of a plan or discharge, the court can revoke the order of confirmation or discharge.

Can a Debtor Pay a Discharged Debt After Their Bankruptcy?

A debtor who gets a discharge can voluntarily repay any discharged debt. You may wonder why they would want to do this.

Sometimes, a debtor agrees to repay a debt because they owe it to a family member or someone the debtor has a relationship with, such as a family doctor.

What to Do if a Creditor Tries to Collect a Discharged Debt?

If a creditor tries collection efforts on a discharged debt, the debtor can file a motion with the court and ask that the case be reopened to address the matter. The bankruptcy court often does this to ensure creditors don't violate the discharge order.

The discharge is a permanent statutory injunction prohibiting creditors from taking any action to collect a discharged debt. The court can sanction a creditor for violating the discharge injunction. The standard sanction for violating the discharge injunction is civil contempt, often punishable by a fine.

Can an Employer Fire Someone for Filing Bankruptcy?

The law expressly prohibits discriminatory treatment of debtors by both governmental units and private employers. A governmental unit or private employer may not discriminate against a person solely because the person is a debtor or has not paid a dischargeable debt.

The law bans the following actions against bankruptcy debtors:

  • Terminating an employee
  • Denying a promotion based on an employee's debtor status
  • Discriminating on hire by government employers
  • Denying, revoking, suspending, or declining to renew a license, franchise, or similar privilege

How Can a Bankruptcy Attorney Help?

You have rights if a creditor is hounding you to pay a discharged debt. Ideally, the bankruptcy court will resolve this issue for you. If not, contact a bankruptcy attorney. They'll review your case and explain your options.

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