Discharge in Chapter 7 - Part 12 of 12

A 12-part Series On All You Need To Know About The Process of Filing for Chapter 7 Bankruptcy

Part Twelve – Discharge in Chapter 7

The very last step in a Chapter 7 bankruptcy is the order of discharge. A bankruptcy discharge “operates as an injunction against the commencement or continuation” of any act to collect or recover a debt as a personal liability of the debtor. Although a bankruptcy might get filed, a discharge will be denied where the debtor received a discharge in a Chapter 7 case commenced within eight years of the date of filing of the current petition.

There are several categories of debts that are not dischargeable. These include:

1. Some tax debts.
2. Domestic support obligations.
3. Marriage Dissolution or Separation-related debts other than support.
4. Fines, Penalties, or Forfeitures to the government.
5. Debts for restitution in criminal cases.
6. Student loan debts.
7. Court filing fees.
8. Post petition debts.
9. Debts from prior bankruptcy in which debtor was denied or waived a discharge.
10. Debts incurred due to Money, Goods, or Services obtained by fraud or falsehood.
11. Debts incurred due to Fiduciary Fraud, Larceny or Embezzlement.
12. Debts incurred due to Willful and Malicious Injury.
13. Death or Injury caused by drunk driving.
14. Debts due to Securities Fraud.

In addition to this list, secured debts remain enforceable against the secure property, but any deficiency is discharged.

Creditors, the Trustee, or the U.S. Trustee may object to a debtor receiving a discharge of all debts in a bankruptcy where the debtor has engaged in acts resulting in harm to the creditors. An objection to discharge must be filed before sixty days after the first date set for the meeting of creditors. This includes acts by the debtor trying to “hinder, delay or defraud” a creditor. This usually occurs when a debtor attempts to transfer or conceal property to protect it from being liquidated. To prove this the debtor must have had a “subjective intent” to hinder, delay or defraud.

It is possible to get certain non-dischargeable debts discharged by filing an adversarial proceeding. This is basically a lawsuit filed by the debtor for an order that a non-dischargeable debt be discharged. This happens a lot with student loan debt. Essentially the debtor files a lawsuit against the creditor (and servicer for student loans) seeking an order from the court to discharge the debt.