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Understanding the discharge process in bankruptcy proceedings

In bankruptcy proceedings, "discharge" means to permanently relieve an individual or business of a debt obligation. Each part of the bankruptcy code - Chapter 7, 11, 12 and 13 - handles discharge and debt relief a little differently. However, procedures under all chapters share certain common features.

No matter what chapter a case falls under, discharge is good for debtors. It is a permanent order from a judge prohibiting creditors from collecting on particular debts. In other words, creditors may no longer make harassing phone calls or send threatening letters. Filers need not notify their creditors of the discharge order. Instead, the court clerk normally sends a copy of the order to all registered creditors.

In most cases, the judge issues the discharge order at the conclusion of proceedings. In liquidation cases under Chapter 7, discharge may occur as soon as four months after the case is filed with the court. In Chapter 7 and 13 cases, the debtor may be required to take a financial management course before the court will discharge a debt. In Chapter 11, 12 and 13 cases, the discharge normally occurs after the debtor has completed his or her payment plan, which might not occur until years after the initial filing.

While nearly all debts can be discharged in bankruptcy proceedings, some are exempted. This means a court may not discharge them. The most common types of non-dischargeable debt include taxes, government fines and penalties, child support and alimony, student loans, court-imposed damages for certain personal injury cases, and those debts not reported to the bankruptcy court in required schedules and filings.

Understanding what debts may or may not be discharged by a court is crucial for people considering filing for bankruptcy. The process, however, can be complicated. For this reason, it is often wise to consider speaking with a legal professional who is experienced with bankruptcy.

Source: United States Courts, "Discharge in Bankruptcy," accessed on May 5, 2015

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