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Discharge of Debts -
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Limitations on Discharge Before filing the bankruptcy case, though, the attorney and debtor should thoroughly review the situation to make sure what debts will likely be wiped out. This is because the discharge is limited in scope.
Limits by Chapter Limits by Chapter: only individual debtors (no corporations or partnerships) can receive a discharge in Chapter 7. In Chapter 13, only individuals can file, and they will receive a discharge. In Chapter 11, individuals, as well as corporations and partnerships, are eligible to receive a discharge. Limits on Type of Debt Some debts cannot be discharged, including, domestic support obligations, obligations under marital settlement decrees, debts based on fraud, misrepresentation, breach of fiduciary duty, embezzlement, or theft, debts where debtor caused willful or malicious injury to another person or that person's property, recent taxes, educational loans, drunk driving damages, and criminal fines and restitution awards. Thus, while the debtor may receive a discharge, it may not cover all of his debts, including those listed above, if they are deemed to be non-dischargeable.
Discharge Limited to "Poor but Honest Debtor":
The general rule is that an individual debtor will receive a discharge.
However, there are 12 exceptions to that rule, set forth in Bankruptcy
Code Section 727(a). These are generally situations where the debtor
has done something wrong which impacts his creditors as a whole, including:
transferring property within one year prior to the bankruptcy case
with the intent to hinder, delay or defraud creditors; destroying
concealing, falsifying, or failing to maintain, records from which
the debtor's financial condition can be determined; refusing to comply
with bankruptcy court orders; or lying on his bankruptcy papers. The
thinking is that only the poor but honest debtor is entitled to the
relief provided by a discharge. The bankruptcy court is not a haven
for scoundrels trying to dodge their debts. Limited Effect on Liens
While the discharge wipes out the debtor's personal liability for
the underlying debt, it does not eliminate a lien that covers property,
except in certain circumstances. Generally, once the bankruptcy case
is over, the lien "rides through", and the creditor is free
to enforce the lien after the bankruptcy case. This includes claims
by car creditors, mortgage companies, and other secured creditors.
Written by Henry Rendler | ![]() | ![]() ![]() ![]() ![]() ![]() ![]() ![]() - Automatic Stay - Avoiding Powers - Lien-stripping - Race to the Courthouse ![]() ![]() ![]() - Bankruptcy Estate - Federal - Homestead - Planning ![]() ![]() ![]() ![]() ![]() - Consequences - Criminal Fraud - Prosecution - Reporting Fraud ![]() ![]() - Asset Liquidation - Chapter 7 Discharge - Non-dischargeable - Repayment of Debts ![]() - The Debtor - Filing Chapter 9 - Jurisdictional Issues ![]() - Debtor in Possession - The Examiner - Reorganization/Debtor - Chapter 11 Trustee - Creditors Committee - Finances - Filing Lawsuits - Creditors' Rights - Dismissal/Conversion - Selling of Assets - Reorganization Plan - Plan Procedures - Plan Provisions - Claims - Common Plans - Payment of Interest - Chapter 11 Attorney ![]() - Qualifications - The Discharge ![]() - Advantages - Filing Chapter 13 - Meeting of Creditors - Filing Chapter 13 Plan - Creditors' Claims - Plan Confirmation - Order Confirming Plan - Appealing OCP - Modifying Plan - Defaulting - Discharge ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() What You Should Know ![]() |