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What is a discharge in bankruptcy?

Washington residents contemplating filing for bankruptcy may wonder exactly what it means when a bankruptcy is discharged.

A bankruptcy discharge means that the debtor is released from all personal liability for the specified debts listed in the bankruptcy filing. They no longer have any legal responsibility to pay any of the discharged debts.

The discharge permanently prevents creditors from initiating or continuing collection actions over these discharged debts. This means the debtor cannot be sued and that collectors are barred from communicating with the debtor in any way about the debts.

However, any valid property liens that have not been made unenforceable or avoided in the personal bankruptcy still are withstanding, meaning that secured creditors can legally enforce any liens in order to recover properties secured by those liens.

Timing of discharges can vary depending upon whether a Chapter 7, 11, 12 or 13 were filed by the debtor. Usually in a liquidation case filed under Chapter 7, the judge will grant the discharge when the fixed time for filing an objection to the discharge expires and the time is up for filing motions to dismiss. This is usually four months after the petition for bankruptcy relief is filed with the court.

In Chapter 11 and some instances of chapter 12 and 13, the court can grant a discharge as soon as the debtor makes the final payment of the court-approved repayment plan. Discharge can be denied cases of Chapter 7 or 13 if the debtor reneges on completing "an instructional course concerning financial management."

Under the federal Bankruptcy Code, only limited exceptions are provided to the financial management agreement. Some of those exceptions might be if the bankruptcy administrator or trustee finds that inadequate programs on financial management education exist, if the debtor is in a combat zone on active duty in the military, incapacitated or disabled.

When you are ready to take charge of your financial insolvency, a Washington attorney who practices bankruptcy law can answer your questions and help steer you into a brighter financial future.

Source: United State Courts, "Discharge in Bankruptcy" Nov. 10, 2014

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