What is a Bankruptcy Discharge?

When you decide to file bankruptcy, you’ll hear the term “discharge” used a lot. What does that mean, and how is it different from a denial or dismissal? Learn more about this important term and how it relates to your bankruptcy case.

If you’re still looking for the right attorney to handle your bankruptcy case, find out how Padgett & Robertson can help you. Call us at 251-336-3695 to set up a consultation right away.

The End Result of a Bankruptcy Filing

A “bankruptcy discharge” is simply the ideal end result of your filing. When your debt is discharged, the slate is wiped clean, and you no longer owe it. The creditor to whom you owed the debt cannot take collection actions against you and the IRS cannot tax you on the discharged debt.

While this is the ideal end result of a filing, it’s important to note that not every debt is treated the same. While most debts are dischargeable in bankruptcy, some are not.

Are All Debts Discharged?

Most consumer debts are dischargeable in bankruptcy. Some debts that can be erased in bankruptcy include:

• Credit cards
• Personal loans
• Loans from friends and family members
• Attorneys’ fees
• Business debts
• Past due utility bills
• Past due rent
• Medical bills
• Civil court judgments
• Unsecured debt

Secured debt may be discharged, but that is a bit more complicated. Since the debt is secured by an asset, the debt may be discharged but that doesn’t mean you get to keep the asset. When the debt is discharged, the creditor will be able to repossess the asset.

Debts That Cannot Be Discharged

For all of the debts that can be discharged, there are many that are not dischargeable. These debts include:

• Student loans
• Child support
• Spousal support
• Debts owed as the result of a DUI injury or death
• Debts incurred as a result of fraud
• Co-op, condo, and HOA fees
• Criminal penalties
• Most tax obligations
• Court fees
• Undisclosed debts

Your Bankruptcy Discharge Could Be Denied

A debt discharge is an ideal outcome—so what are the other options? The court may dismiss your case if you fail to meet the requirements for bankruptcy. For example, if you earn too much to qualify for bankruptcy, you do not take the required educational course, or you intentionally ran up your credit cards prior to filing.

There are numerous additional reasons that the court may deny you a full discharge, including:

• Hiding financial information that would change the outcome of your case
• Transferring assets by selling or giving them away with the intent of taking them back after bankruptcy
• Lying on your bankruptcy forms
• Defrauding your creditors in any way

Improving Your Odds of a Bankruptcy Discharge

As you look over this list, it might seem like there are tons of ways that the bankruptcy court can keep you from having qualifying debts discharged through bankruptcy. What can you do to ensure a smooth bankruptcy process and avoid a dismissal?

The easiest way to avoid unnecessary issues is to hire a bankruptcy lawyer. They can take steps throughout the process to avoid common mistakes that might cause a negative outcome. For example, they will ask important questions to ensure that they have fully accounted for your assets and sources of income. This allows you to avoid a dismissal because your income limit is too high.

The most important thing to do throughout this process is to be honest. Lying to the bankruptcy court is one of the biggest mistakes you can make, and it’s also one of the most common reasons for a dismissal.

It doesn’t matter how small an asset is or how irregular a stream of income is. Every single facet of your financial life must be accounted for in your bankruptcy paperwork. Any omission, intentional or otherwise, will make the trustee think that you are hiding more. They are very good at figuring out when someone is lying or hiding something, and it is simply not worth the stress it will cause you.

Get Your Questions Answered with Padgett & Robertson

With the help of an experienced bankruptcy attorney, you can feel confident as you work through this process. Let’s set up a time to talk about your next steps. Just call us at 251-336-3695 or send us a message online now.