THE DISCHARGE ORDER – THE “HOLY GRAIL” OF BANKRUPTCY

photo of a holy grail in a cave

The Holy Grail … King Arthur sought it (long before Monty Python) as did Indiana Jones in the Last Crusade.  The Holy Grail is a mythical artifact synonymous with a treasure that is sought by all who accept the quest before them.  In the Bankruptcy realm, the ‘treasure’ that you seek when you file a bankruptcy case is a Discharge Order.  A Discharge Order is the Bankruptcy Court’s way of giving you a fresh start, effectively telling you that you are done with your case, and you no longer owe most if not all of your unsecured debt.

Unsecured debts are debts such as credit card debt, payday loans, and medical bills.  They are “unsecured” because they don’t have anything to “secure” the debt, such as a house or car.   Mortgages on a house and car loans are discharged as well unless the debt is reaffirmed.  Debts that are not discharged usually include Domestic Support Obligations, like child support or alimony, most taxes and federally guaranteed student loans, and debts procured by fraud.

While it seems like a lot of debt is not discharged, the truth is that most people who file for bankruptcy don’t owe much in the way of debt that cannot be discharged.  Once you get your Discharge Order, you are not legally obligated to pay any of the unsecured debts that you owed at the time you filed, ever!  Even if you inadvertently failed to list a creditor.

Failure to list a creditor does not automatically render that debt non-dischargeable.  As long as the creditor has not suffered some sort of prejudice by not being able to file a claim or a complaint alleging fraud, the debt is still discharged.  If you file bankruptcy and realize a year or two later that you forgot to list someone, don’t panic.  Just notify the creditor of your bankruptcy case and then notify your bankruptcy attorney in case the creditor continues to harass you.  In most instances, the creditor will stop any further collections.  If the creditor has a basis for pursuing fraud or missed an opportunity to file a claim, then you may have to work something out with the creditor to avoid additional litigation.

The bottom line is that if you and your attorney do everything right, you should get a Discharge Order.    You need to follow all the rules in the Bankruptcy Code, complete a required Credit Counseling course and a Financial Management Course, and, most importantly, be honest.  You are required to disclose “list” every company or person you owe (“all creditors”) and everything you own (“all assets”).   The purpose of the bankruptcy laws is to allow the “honest but unfortunate” Debtor to get a fresh start.  If you don’t follow all of the rules or don’t disclose something, you could be denied a discharge. That is why it is so important to tell your attorney everything about your financial situation.  Even if you don’t think it is important.

While the Discharge Order maybe your “Holy Grail”, it may not necessarily be the end of the case.  If the trustee finds assets to sell, the trustee could continue to liquidate those assets and use the proceeds to pay a portion of your debts, even though you are relieved from your debts.  Most Debtors use exemptions to protect their assets, in which case, the trustee will file a no-asset report.  Therefore, most Chapter 7 Bankruptcy cases end with the Discharge Order.

When will I get my Discharge Order?

In a Chapter 7 case, an individual can get a Discharge Order within about 3 months of filing the case.  In a Chapter 13 case, an individual can get a Discharge Order after making all required plan payments pursuant to a plan confirmed by the bankruptcy court.  The Chapter 13 Discharge Order typically occurs 3 to 5 years after filing depending upon the length of the plan term.

Who can’t get a Discharge Order?

Corporations cannot get a Discharge Order in Chapter 7.  Corporations can only receive a discharge in a confirmed Chapter 11 plan that is substantially consummated.  Individuals who are found to have committed fraud by lying on their bankruptcy petition cannot get a Discharge Order.

Also, a person cannot file another Chapter 7 within 8 years of the bankruptcy filing that resulted in a Chapter 7 Discharge Order.  You can file a Chapter 13 after filing a Chapter 7, but you cannot obtain a Discharge Order in that Chapter 13 case if it is filed within 4 years of the prior Chapter 7 filing date.  So, it is extremely important that you tell your attorney about any and all prior bankruptcies that you may have filed before seeking to file another bankruptcy case.  The timing of your prior case will be crucial in determining whether and when you should file another case.

If you are struggling to pay your debts and concerned about the future welfare for you and your family, it is important that you seek the advice of a bankruptcy lawyer to ensure that your assets are protected and the debts you seek to eliminate are dischargeable.  Our attorneys have been assisting consumers and business owners with bankruptcy matters for over 25 years.  If you are considering filing for bankruptcy, please consider contacting the Nomberg Law Firm.  Our office number is 205-882-5005.

Steven D. Altmann has been a lawyer for more than 25 years. Steve has earned an AV rating from Martindale-Hubbell’s peer-review rating and was recently named a Super Lawyer and Top Attorney by Birmingham Magazine in the area of Bankruptcy Law.


We are a Federal Debt Relief Agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

 

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Steve Altmann has been assisting consumers and business owners with bankruptcy matters for more than 27 years. 

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