How Do I Know When Bankruptcy is Discharged?
When people think of bankruptcy, they often think of the elimination of some or all consumer debt through the filing of a Chapter 7 bankruptcy petition and receiving a court-approved discharge of those debts. It’s important to understand specifically, though, what happens when bankruptcy is discharged.
A Chapter 7 bankruptcy is a debt relief option that allows an individual debtor facing an undue hardship eliminate most types of unsecured debt, such as credit card debt, medical bills, personal loans, as well as secured debt, such as an auto loan or even a mortgage (regardless of conventional loan vs FHA loan or something else).
What Does It Mean When Bankruptcy is Discharged?
A Chapter 7 bankruptcy is a debt relief option that allows an individual debtor facing an undue hardship eliminate most types of unsecured debt, such as credit card debt, medical bills, personal loans, as well as secured debt, such as an auto loan or even a mortgage.
Once you complete the bankruptcy process, you receive a court order called a “discharge” that releases you from personal liability for the discharged debts. Specifically, the discharge prohibits creditors (both unsecured creditors and secured creditors) from attempting to collect or otherwise enforce those debts. Since there’s nothing a creditor can do to enforce a dischargeable debt, it effectively means that you no longer have to pay off those debts.
How Long After Filing a Bankruptcy Petition Does It Take to Receive Chapter 7 Bankruptcy Discharge?
Fortunately for people looking how to get out of debt, a chapter 7 bankruptcy proceeding is a very quick process (unlike a chapter 13 bankruptcy, which is based around a repayment plan). When your bankruptcy paperwork gets filed in the appropriate bankruptcy court, you can expect the 341 meeting of creditors within 30 to 45 days of the bankruptcy process being started. (When you file bankruptcy, everything you have an ownership interest in is part of a theoretical bankruptcy estate. At the meeting of creditors, the bankruptcy trustee will ask you questions to examine whether there is any property of the bankruptcy estate they may marshal and liquidate to pay unsecured creditors.
After the 341 meeting of creditors, assuming no issues, the case remains open for about another 60 to 90 days after the date of the meeting of creditors for any creditors or bankruptcy trustee to file objections. If no objections are filed, the discharge is entered and the case gets closed.
So you can expect to receive the chapter 7 bankruptcy discharge in about 90 to 120 days after the initial bankruptcy filing. Once entered by the court, the court will mail you a copy of the discharge order, that you should receive within about a week after the order was entered.
Contrast this with a chapter 13 bankruptcy. A chapter 13 bankruptcy is based around a repayment plan. Under bankruptcy law, the proposed plan (which can be proposed only by an individual debtor, no corporate entities may file chapter 13 bankruptcy) must be either 3 years or 5 years of successful monthly payments to the bankruptcy trustee, and must be completed before debt discharge may occur.
What Happens If Bankruptcy Is Not Discharged?
If a discharge order is not entered, there are larger issues you are likely dealing with in your case. One common reason that your bankruptcy case may not be discharged is because the trustee has filed an objection to discharge. This means that the chapter 7 trustee believes that you are not entitled to a discharge under the Bankruptcy Code. This is often tied to some kind of behavior before your case was filed, such as transfers of certain property, or monthly payments you were making that may be considered preferential.
Another common reason that a bankruptcy is not discharged is because people do not complete the second course. If you decide to file a bankruptcy petition, you may have learned that there are two courses that you have to complete. The first course is known as the credit counseling course. The second course is known as the debtor education course, or sometimes called the financial management course. When you complete each course (which can only be done with a credit counseling agency approved in your bankruptcy court), the credit counseling agency will issue a certificate. That certificate must be filed in your case. Many people forget to complete the second course, and failure to file the certificate of completion of the second course may result in no discharge being entered in your case.
If there is no discharge entered, such as in the case of a bankruptcy dismissal, you can expect quite a few things. First, all debts return to their status pre-petition, since you no longer have bankruptcy protection. If you had been dealing with a debt collector, they may resume attempt to collect the debt. This includes suing you to obtain a judgment lien. (Here in NY, a judgment lien becomes a lien against any real property that you own in the county where the judgment lien is filed.)Also, if there is no discharge and bankruptcy proceedings are over, a secured creditor may seek to enforce whatever rights they had pre-petition, which may include repossession or foreclosure.
Can a Bankruptcy Be Reopened After Discharge is Entered?
If you have recently been through a bankruptcy and you have received a discharge, the case is closed shortly after that. You may be wondering if you can ask the court to get your case reopened. The answer is yes, a bankruptcy case may be reopened after a discharge is entered.
To reopen a bankruptcy case after it has been closed, a motion to reopen the case will have to be filed. A case will be opened only in a limited number of circumstances. One reason a case may be reopened is if there are certain assets that a debtor comes into possession after the case is closed. If the trustee has a right to recover these assets (like an inheritance) the case may be reopened. Another reason a closed bankruptcy case may be reopened is if the debtor is pursuing a violation of the discharge injunction. This may occur when a creditor tried to enforce or collected discharged debt after an individual debtor has been declared bankrupt.
Something to keep in mind about certain secured debt. If you want to keep property that is the subject of secured debt, the secured creditor will likely ask you to enter a reaffirmation agreement. While the discharge injunction also applies to the liability of an individual debtor for secured debt. The reaffirmation agreement the secured creditor wants you to enter reinstates your personal liability for that discharged debt.
Are All of the Debtor’s Debts Discharged or Only Some?
The bankruptcy discharge applies to all debts, unless the debt is specifically excepted from discharge (either under the bankruptcy laws or by court order). When a debtor receives the order of discharge, it simply states that a discharge is entered. It doesn’t list which debts have been discharged and which have not. This is why it’s important to speak with a bankruptcy attorney to understand if any of your debts will not be discharged in a bankruptcy.
For a list of kinds of debts which are not dischargeable under the bankruptcy laws, check out Section 523 of the Bankruptcy Code. Generally speaking, non dischargeable debt types include domestic support obligations (such as child support or spousal maintenance), student loan debt (although you may apply to the court for an undue hardship discharge), and certain kinds of tax debt.
Are the Bankruptcy Discharge and Other Documents Available as Public Records?
When individuals file for bankruptcy, the discharge order is thee document that memorializes that their debts have been discharged. The entire case, including the discharge order, is available in public records. In limited circumstances, a person can file for an order to seal their bankruptcy paperwork.
How to Rebuild Credit After a Bankruptcy Filing
Many people are able to quickly rebuild their credit after filing bankruptcy. Although the record of bankruptcy remains on a credit report for up to 10 years, you may be able to buy cars and houses in just a couple of years after bankruptcy.
The most important is to get a few credit cards and loans after your discharge is entered, and use them. Just don’t default! If you have the income to support it, you can rebuild credit quickly after your case is closed. (As a matter of fact, many people report a jump in their credit score immediately after filing bankruptcy. Also, many people receive offers for new credit cards immediately after the discharge is entered and their case is closed.)
Some people also look to obtaining a secured credit card after filing bankruptcy. With a secured credit card, the issuer will often request a deposit upfront, and then allow you to use credit. For instance, you may have to deposit $100 and be able to use your secured credit card as if it had a limit of $100. Other issuers may require a deposit of $100 and allow you to use a secured credit card with a limit of $500, which is more in line with the experience of a traditional credit card (which is unsecured debt).
One other important thing you may want to do as you rebuild your credit after filing bankruptcy is to order and review your credit report anywhere from 3 to 6 months after the bankruptcy debt discharge is entered. This isn’t just to check on your credit score, but to make sure all the discharged debt is being properly reported on your credit report.
After you’ve been declared bankrupt, any debt collector or other creditor holding discharged debt should not take any adverse action against you concerning that debt. This includes negative reporting on your credit report, which will impact your credit score. Any consumer debt that was discharged in bankruptcy proceedings should be reported as in bankruptcy. If a creditor continues to report negatively (such as missed payments), they may be in violation of the discharge injunction, and you may be able to sue that debt collector in bankruptcy court.
Contact the Law Office of Richard Kistnen today to speak with a low cost bankruptcy lawyer in NYC to file your chapter 7 bankruptcy case and get the financial fresh start you deserve!
With so many people facing an undue hardship in their finances today, it’s important to explore your debt relief options. The goal of a bankruptcy filing is to get a debt discharge order signed and entered by a bankruptcy judge. This means that both unsecured creditors as well as secured creditors cannot come after you to collect or enforce dischargeable debt.
If a creditor does so, they may be in violation of the discharge injunction, which is the bankruptcy protection found in the Bankruptcy Code that prohibits creditors from attempting to collect or enforce discharged debt. You want to be confident that when you start the bankruptcy process, you understand what’s included (most unsecured debt, most secured debt) as well as what’s not included (often, consumer debt including a student loan, certain tax debt, as well as domestic support obligations) for when bankruptcy is discharged at the end of bankruptcy proceedings.
Speaking with an experienced bankruptcy lawyer in NYC the Law Office of Richard Kistnen is the best and quickest way to take advantage of all the bankruptcy protection, and to get your financial fresh start as quickly as possible. Click here to book your confidential, no-obligation consultation, or schedule your appointment by using the contact info below.