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Chapter 7 Bankruptcy Discharge Explained

Posted by Kevin Chern

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What is Chapter 7 Bankruptcy discharge?

While complex legal proceedings, such a Chapter 7 Bankruptcy case, might seem confusing and mystifying, the discharge is actually a fairly simple and straightforward thing.  The discharge is the end result of successfully completing a Chapter 7 Bankruptcy case.  Discharge, simple put, is the elimination of your unsecured debt.  In other words, upon discharge you will no longer owe to your creditors certain types of debt.  In fact, a Chapter 7 Bankruptcy discharge will eliminate the vast majority of types of debt you have, provide you with a fresh start and allow you the opportunity to rebuild your credit.

A Chapter Bankruptcy discharge removes your legal liability on most types of consumer debt.  You are not required to pay the debt back.  A creditor can never collect on that debt again!  Ever!  So, what happens to your debt once it is discharged?  It is not paid back.  It is not shifted to anyone else.  It is simply wiped out.

What kinds of debt are affected?

Most types of unsecured consumer debt can be eliminated with a Chapter 7 Bankruptcy Discharge.  For example, the following debts are eliminated with a Chapter 7 Bankruptcy Discharge: credit cards, medical bills, payday loans, unsecured personal loans, utility bills, old cell phone bills, and deficiency balances from repossessed cars and foreclosed homes.  What do all of these types of debt have in common?  They are unsecured debt.

Unsecured debt

What is unsecured debt?  Unsecured debt is debt that is not attached to a particular piece of property, and defaulting on an unsecured debt will not result in the loss of any property.  In other words, if do not make your credit card payments the credit card company cannot repossess the items you purchased with the credit cards.

After a Chapter 7 Bankruptcy discharge your creditors cannot resume with any collection efforts.  For instance, a creditor cannot file a lawsuit, garnish you or even call to collect that debt ever again.  A creditor cannot collect on that debt at all!

A Chapter 7 Bankruptcy discharge cannot eliminate some types of unsecured debt.  By law, some creditors can resume the collection of certain types of debt even after a Chapter 7 Bankruptcy discharge.  The most common examples of debts that are not discharged by a Chapter 7 Bankruptcy are student loans, past due child support, recent tax debt, debts incurred by fraud, bounced check fees, criminal restitution and debts owed to the government such as parking tickets and the overpayment of government benefits.

Discharge injunction violations

If a creditor tries to collect a debt discharged in your Chapter 7 Bankruptcy after your case has successfully completed, you might be able to collect monetary damages from that creditor.  If a creditor attempts to collect a debt after the discharge of your Chapter 7 Bankruptcy, it is called a discharge injunction violation.  Examples of discharge injunction violations include continuing to call to collect on a debt, sending you collection letters, filing a lawsuit against you, failing to stop a lawsuit against you or failing to end a wage garnishment.  If any these thing have happened to you, and you have suffered actual damages, you might have a case against one your former creditors.

Chapter 7 Bankruptcy discharge and secured debt

A Chapter 7 Bankruptcy discharge can also help you, to a limited extent, eliminate secured debt.  Secured debt is debt that is attached to a piece of property, such as car or home.  The most common types of secured debt are loans obtained to help pay for a car or a home.  It is “secured” because if you not make the payments the creditor can take away the property.  For example, if you do not make your car payments, the creditor will repossess your car.  A Chapter 7 Bankruptcy discharge can eliminate secured debt if you are willing to give back the property by which the debt is secured.  In the case where you can no longer afford to make payments on a house or car, and just want to walk away, a Chapter 7 Bankruptcy discharge can eliminate the car loan or the mortgage.

A Chapter 7 Bankruptcy discharge is a powerful tool that allows you to wipe out most types of consumer debts and will provide you with an opportunity to rebuild.

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Posted on July 6th, 2015


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