No matter which chapter of the bankruptcy law you and your lawyer choose, the reward to be expected is a “discharge” of your unsecured debts. There are lots of things to be considered from a legal point of view. There are limits on the discharge of many types of debts. However, subject to some restrictions, once a debtor has completed his/her bankruptcy, the Court will issue an order granting a discharge to the person named as the debtor. A discharge is not the same thing as a dismissal. A discharge is a good thing; a dismissal is usually not a good thing.
Collection of Discharged Debts Prohibited
The discharge prohibits any attempt to collect from the debtor a debt that has been discharged. For example, a creditor is not permitted to contact a debtor by mail, phone or otherwise, to file or continue a lawsuit, to attach wages or other property, or to take any other action to collect a discharged debt from the debtor. [In a case involving community property: There are also special rules that protect certain community property owned by the debtor’s spouse, even if that spouse did not file a bankruptcy case.] A creditor who violates this order can be required to pay damages and attorney’s fees to the debtor.
However, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtor’s property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case. Also, a debtor may voluntarily pay any debt that has been discharged.
Debts That Are Discharged
The Chapter discharge order eliminates a debtor’s legal obligation to pay a debt that is discharged. Most, but not all, types of debts are discharged if the debt is provided for by the Chapter 13 plan or is disallowed by the Court, pursuant to Section 502 of the Bankruptcy Code.
Debts That Are Not Discharged
Some of the common types of debts which are not discharged in a Chapter bankruptcy case are:
a. debts that are in the nature of alimony, maintenance or support
b. debts for most student loans
c. debts for most fines, penalties, forfeitures or criminal restitution obligations
d. debts for personal injuries or death caused by the debtor’s operation of a motor vehicle, vessel or aircraft while intoxicated
e. debts provided for under Section 1322(b)(5) of the Bankruptcy Code and on which the last payment is due after the date on which the final payment under the plan was due
f. debts for certain consumer purchases made after the bankruptcy case was filed, if prior approval by the Trustee of the debtor’s incurring the debt was practicable but was not obtained