Bankruptcy discharge happens when debts are erased by bankruptcy. The bankruptcy discharge becomes a permanent order directed to the creditors on behalf of the debtor. This stops creditors from taking any action or collection on discharged debts, including legal action, telephone calls, letters or personal contact. This action relieves the debtor of personal liability for all discharged debts. A valid lien, (a charge upon specific property to secure payment of a debt that has not been avoided) made unenforceable in the bankruptcy case will remain after the bankruptcy case. In this situation, a secured creditor may enforce the lien to recover the secured property.
Timing of a bankruptcy discharge depends on the chapter under which the case is filed. In a chapter 7 bankruptcy case the court usually grants the discharge on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse. This usually occurs four months after the date the debtor files the petition with the clerk of the bankruptcy court. In chapter 11 cases, the discharge occurs upon confirmation of a chapter 11 plan. In cases under chapter 12 and chapter 13, the court grants the bankruptcy discharge as soon as the debtor completes all payments under the established plan. Since a chapter 12 or chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs four years after the date of filing.
If there is no litigation involving objections to the discharge, the debtor will automatically receive a bankruptcy discharge. The federal rules of a bankruptcy procedure directs the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the trustee in the case and the trustee’s attorney. The debtor and the debtor’s attorney also receive copies of the discharge order. The notice, which is simply a copy of the final order of discharge, is not specific as to those debts determined by the court to be not covered by the discharge. The notice informs creditors that the debts owed to them have been discharged and that they should not attempt any further collection. They are cautioned in the notice that continuing collection efforts is a punishable offence. Any unintentional failure on the part of the clerk to send the debtor or any creditor a copy of the discharge order promptly, within the time required by the rules, does not affect the validity of the order granting the bankruptcy discharge.
Frequently asked bankruptcy questions: