Your financial struggles reached a point where you could no longer keep up with the payment of your debts. Creditors and debt collectors may be calling you daily demanding payment. Your stress levels are at an all-time high, and you need some relief.
You consider filing bankruptcy but aren't sure about it. Perhaps one of your biggest questions is what it means to receive a discharge. How does this help you? Will all of your debts go away?
Defining the discharge
After completing all of the legally required and court-ordered steps in Chapter 7 or Chapter 13 bankruptcy, which are the primary ones consumers like you file, the court will issue an order "discharging" you from responsibility for certain debts. This means that from the date of the order, you are no longer legally responsible for payment of those debts. The creditor you owed the debt to can no longer look to you for payment.
However, if you have secured debts such as an auto loan or a mortgage loan, the creditor can continue to pursue payment from you or take possession of the property securing the loan. For instance, a creditor can repossess your vehicle, or a lender can foreclose on your home. You may voluntarily give up the property during the bankruptcy as well.
The court won't discharge some debts
The court may not discharge all of your debts, which means you remain responsible for them after the conclusion of your bankruptcy. Those debts include the following:
- Debts you forgot to list in your bankruptcy petition
- Debts associated with a DUI
- Debts owed under a divorce decree or settlement
- Domestic obligations such as child support or alimony
- Court costs
- Certain taxes
- Certain penalties, restitution and fines associated with criminal activity
- Loans from a retirement plan
- Homeowners' or condominium association fees incurred after filing the petition
- Debts a previous bankruptcy did not discharge
Some additional debts may not qualify for discharge in a Chapter 13 bankruptcy. Moreover, student loan debt is notoriously difficult to discharge. Some other debts associated with fraudulent or criminal acts may also remain after you receive a discharge of your other qualifying debts. If the court finds you incurred debt for "luxuries" in the months prior to filing for bankruptcy, you could remain responsible for those debts as well.
Your creditors have the right to challenge the discharge of a particular debt as well. If the court agrees with the creditor, you will remain responsible for that particular debt even if it could have otherwise qualified for discharge. A Tennessee bankruptcy attorney could help you determine which of your debts would receive a discharge and which ones you could end up legally responsible for when your bankruptcy is complete.