When you file for personal bankruptcy under Chapter 7 of the U.S. Bankruptcy Code, you have two main goals. The first is to stop your creditors from bothering you. This is accomplished as soon as you file and the court issues a stay — a legal order that prohibits your creditors from contacting you. The stay lasts until your case is resolved.
If all goes as expected in your bankruptcy case, you can reach the second goal a few months later — typically, between three and five months later. This is the discharge of your debts.
Your discharge is a court order listing certain debts and stating that you are no longer personally responsible for them. The Chapter 7 discharge will prevent your creditors from trying to collect these debts.
What can be discharged?
Many types of debt can be discharged in a Chapter 7 bankruptcy, including, but not limited to:
- Medical debts
- Credit card late fees
- Past due fees for utility bills
- Civil judgments
- Certain auto accident claims
What cannot be discharged?
The Bankruptcy Code prohibits certain types of debts from discharge. These include:
- Child support and spousal support obligations
- Certain types of tax debt
- Student loans
About that last item: There are special circumstances in which some debtors can have student loans discharged through bankruptcy.
It’s also important to note that, in some circumstances, the court will not discharge debts that would otherwise be dischargeable. For instance, the Bankruptcy Court will not discharge an auto accident claim against you if it is found that you were driving drunk at the time of the accident. Likewise, the court won’t discharge any debts that it finds came about because you committed fraud.
Facing debt is scary, and filing for bankruptcy can be intimidating. Legal professional with experience in debt relief help debtors understand their options.