Discharging debt through bankruptcy can provide immense financial relief. Once the automatic stay goes into effect, creditors will be legally required to cease all collection activities and you will no longer have to strain yourself to pay them back.
Debt discharge is the end goal of the bankruptcy process. We all know that being in debt is extremely stressful and financially prohibitive. That’s why it’s so important to develop an understanding of your options. Doing so will empower you to make the best decision for you, your family, and your financial future.
The experienced bankruptcy attorneys at Flexer Law have been serving the Middle Tennessee community since 1981. We can guide you through the filing process and get you on the path towards financial freedom.
What is Bankruptcy Discharge?
A bankruptcy discharge eliminates specific types of debts. You will no longer be legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting creditors from taking any form of collection action on discharged debts. This includes all forms of legal action and communication, such as telephone calls, letters, and emails.
Debt discharge occurs in both Chapter 7 and Chapter 13 bankruptcy, however, there are some differences in the way it happens under each chapter. Chapter 7 discharge occurs within a matter of weeks, while Chapter 13 discharge occurs after the repayment plan is fulfilled. Chapter 13 does however offer a broader discharge than a Chapter 7.
It is important to speak with a trusted attorney before the bankruptcy filing process. At Flexer Law, we take the time to carefully review every aspect of your case while also considering your financial history. We will help you understand which debts qualify for discharge and guide you through the process with full confidence.
How Does Bankruptcy Discharge Work?
When you file for bankruptcy, a copy of the discharge paperwork will be sent to all of your creditors. This official order informs creditors that they are legally unable to collect on their debts. In the event that one of your creditors ignores this order, a motion can be filed to reopen the case and they will face consequences, including being fined if the courts determine that the creditors violated the discharge injunction. It’s worth noting that the IRS cannot collect tax on discharged debt, and it won’t be treated as income.
Joint account holders and cosigners aren’t protected under bankruptcy. When you receive your bankruptcy discharge, your personal liability is lifted. Your cosigner is still responsible for the remaining debt. However, you can still make voluntary payments on your debt balance to ensure that it gets fully paid. Creditors can still collect debts and even sue cosigners and joint account holders for any discharged debts.
If you file for Chapter 13, your bankruptcy discharge will stay on your credit report and affect your credit score for seven years after you file. For Chapter 7 protection, it’ll appear on your credit report for ten years from the date you file. You should keep a copy of your discharge order and all other bankruptcy paperwork to correct credit report issues or deal with creditors who try to collect debts after bankruptcy discharge.
What Debts Can and Cannot Be Discharged?
When you file for bankruptcy, your debts get organized into two categories—priority and non-priority unsecured debt. Secured debt is protected by a form of security to the lender against non-repayment from the borrower while unsecured debt isn’t. Priority debts get paid first if the money is available to creditors. These debts receive special treatment and get paid before lower-ranking debts, also known as nonpriority debts.
Many people file under Chapter 7 to wipe out their debt. Some debts are nondischargeable, but Chapter 7 will eliminate most of your remaining debts—most commonly credit card and medical bills. Most nonpriority debts are dischargeable in Chapter 13. However, you’ll likely pay off some of these in your repayment plan. The remaining balance will be dischargeable debt at the end of your repayment period.
It may surprise you to learn what debts can and cannot be discharged when you file for bankruptcy. This will vary depending on the type of bankruptcy you file. Here is a list of dischargeable debts in Chapter 7 and Chapter 13.
Debts Eligible for Discharge in Chapter 7
- Credit card debts
- Medical bills
- Personal loans and business debts
- Past utility bills
- Past due rent
- Attorney fees
- Judgments in lawsuits
- Certain tax obligations
- Some debts from car accidents
- Unsecured debts
- Cash advances
Debts Normally Not Eligible for Discharged in Chapter 7 (may be eligible in Chapter 13)
- Child support and alimony
- Mortgages and related fees
- Certain tax obligations
- Debts incurred by criminal activity
- Debts related to DUI/DWI injury or death
- Student loans
- Car loans
- Debts secured by liens
- Debts from a prior bankruptcy case
- Court costs
The timing of when you collect your debts also plays a role in dischargeability in bankruptcy. There are two types of debt filings that apply to Chapter 7—pre-filing debt and post-filing debt.
If you acquire debts before you file for Chapter 7 bankruptcy, they will be discharged. Pre-petition debt includes credit card balances, personal loans, and medical debt.
If you begin to build up debt after you file Chapter 7 bankruptcy, you’ll remain responsible for those balances after your filing date.
Types of Bankruptcy Discharges
Your financial circumstances will dictate whether filing for Chapter 7 or Chapter 13 bankruptcy protection is in your best interest. It is worth noting that Chapter 13 bankruptcy allows some debts to be discharged that can’t be discharged in a Chapter 7 bankruptcy.
Chapter 7 Bankruptcy Discharge
If you file Chapter 7, your nonexempt assets will be liquidated and the proceeds will be divided up among your creditors. Any remaining debt will be discharged or eliminated.
Chapter 13 Bankruptcy Discharge
If you file Chapter 13, you’ll enter into a payment plan that repays your debts over a three to five-year period. At the end of your repayment plan, any remaining debts will be discharged.
Top Bankruptcy Attorneys in Middle Tennessee
Making the decision to file for bankruptcy can provide immediate financial relief while giving you a clean slate to rebuild your credit and move forward. To ensure a smooth process, it is invaluable to enlist the help of an attorney you can trust.
Flexer Law has been serving the legal needs of Middle Tennessee residents since 1981. Our experienced bankruptcy attorneys will work diligently on your behalf to provide the best financial outcome for you.
Regardless of your financial situation or employment status, we will guide you through the bankruptcy filing process with confidence. If you are worried about the cost of hiring an attorney, know that we offer payment plans to ease the burden, and in most cases, no money down on Chapter 13 plans.
We have three office locations throughout Middle Tennessee to accommodate your legal needs. Contact us for a free consultation, either in person or virtually, and we will get to work on finding the best solution for getting your financial life back on track.