What is a discharge?
The definition, according to the Webster Dictionary, is “to end the service of (someone) in a formal or official way.” According to the Black’s Law Dictionary, a discharge is “any method by which a legal duty is extinguished; esp., the payment of a debt or satisfaction of some other obligation.” In Bankruptcy, a discharge is commonly referred to as the final order from the Court at the conclusion of the case. This is an individual’s sign that the process has been completed successfully. I tell clients to keep the notice of discharge as proof that the debts are satisfied in case a creditor attempts to collect after the fact. A discharge is the goal when filing bankruptcy. Most debts are dischargeable. However, there are exceptions. The Bankruptcy Code lists 19 categories of non-dischargeable debts. It is important to know which debts may fall into the non-dischargeable category.
Most debts are discharged, but there are exceptions
The following debts are always considered non-dischargeable:
- Tax debts for certain years and other special kinds of tax.
- Child support or alimony
- Student loans (unless you can establish an undue hardship)
- Court fines and penalties
- Debts to government agencies for fines and penalties
- Debts intentionally not listed in the bankruptcy schedules
Additional debts that creditor’s can challenge you on under certain circumstances
The following debts may be contested and deemed non-dischargeable:
- Debts obtained by fraud or false pretenses
- Debts obtained as a result of willful and malicious injury to another
- Debts obtained within 90 days of filing for bankruptcy if used for purchases of luxury goods over $600
- Cash advances aggregating more than $825 that are under an open end credit obtained within 70 days of filing for bankruptcy
The following may be reasons for denial of a discharge
- False statements presented to the Court, perjury or other fraudulent acts
- Attempts to transfer or hide assets in order to defraud or hinder your creditors
- Violation of a court order
- Destruction or concealment of books/records
- Failure to complete the required post petition financial management course
- Failure to file necessary schedules or provide requested tax documents
- The debtor is not eligible for a discharge due to the eligibility requirements
An experienced bankruptcy attorney can spot issues that may impact a potential discharge. Please contact me with any questions.