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BANKRUPTCY DISCHARGE: AN EXPLANATION FROM OUR CHICAGO BANKRUPTCY LAWYER

Wonais Law

What is a bankruptcy discharge?

When you file for either Chapter 7 or Chapter 13 bankruptcy, the underlying goal is to complete your case and receive a bankruptcy discharge. Once a discharge order is entered in your case, you are no longer personally liable on any debt eligible for discharge in your case. This means, you no longer owe your creditors money, and they cannot seek to collect on that debt anymore – no more garnishing your wages, filing lawsuits, or harassing you for money.

How do I receive a Chapter 7 discharge?

In a Chapter 7 bankruptcy, you will typically receive a discharge order within four months after filing. To receive your discharge, you must attend your meeting of creditors and complete a debtor education course. However, discharges can be delayed in certain circumstances. One instance is when the Chapter 7 trustee finds assets in your case to liquidate. This will hold up your discharge as the trustee evaluates if they should proceed with selling any of your property to use the proceeds to pay your creditors. Another delay may be caused by a creditor believing the money owed to them should not be discharged. A common example of this is debt incurred due to fraud.

If all goes according to plan, a Chapter 7 discharge order will eliminate most unsecured debt, including medical bills, past due utilities, back rent, credit cards, old repossessions, payday loans, and even certain income tax debt. Debt not eligible for discharge are student loans, recent income tax debt, and some debt owed to the government such as tollways and parking tickets.

How do I receive a Chapter 13 discharge?

In a Chapter 13 bankruptcy, you will receive a discharge order once you have completed all your plan payments and requirements pursuant to your confirmed repayment plan. Because a Chapter 13 lasts from three to five years, you will not receive a discharge as quickly as you would in a Chapter 7. You also need to complete a debtor education course to receive your discharge.  

Chapter 13 bankruptcy will discharge certain debt that a Chapter 7 would not. The most common example, especially in Chicago, are parking, red light, and speeding camera tickets. In addition, income tax debt will be eliminated as long as the proposed plan repays priority tax debt in full.

How will creditors know my debt has been discharge?

When you initially file your case, your bankruptcy petition lists all your creditors and their addresses. The court then sends notice to all your creditors once the case is filed. It is imperative that you make sure to include all creditors in your case for this reason. These same creditors will receive notice of your discharge once your case is over. Because the court sends notice via mail, unless a creditor registered for electronic notice, it may take a week before your creditors receive notice of your discharge.  

What happens if a creditor tries to collect on a discharged debt?

It is illegal for a creditor to attempt to collect on debt that was discharged in your bankruptcy case. If a creditor calls or emails you about any discharged debt, inform them you filed bankruptcy and give them your case number. If they continue to call or harass you after that, contact our Chicago bankruptcy lawyers to see if it is possible to seek monetary damages against them.

If you are considering filing bankruptcy and would like to know more about whether your debt will be discharged and eliminated in either a Chapter 7 or Chapter 13 bankruptcy case, call DebtPros and speak with a bankruptcy attorney in Chicago at (312) 883-5422.

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