Exploring the Bankruptcy Discharge

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:

1. Tax debts for certain years and other special kinds of tax.
2. Child support or alimony
3. Student loans (unless you can establish an undue hardship)
4. Court fines and penalties
5. Debts to government agencies for fines and penalties
6. 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:

1. Debts obtained by fraud or false pretenses
2. Debts obtained as a result of willful and malicious injury to another
3. Debts obtained within 90 days of filing for bankruptcy if used for purchases of luxury goods over $600
4. 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

1. False statements presented to the Court, perjury or other fraudulent acts
2. Attempts to transfer or hide assets in order to defraud or hinder your creditors
3. Violation of a court order
4. Destruction or concealment of books/records
5. Failure to complete the required post petition financial management course
6. Failure to file necessary schedules or provide requested tax documents
7. 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.