Jump to Navigation

Discharge Under Chapter 7

The thought of filing for bankruptcy can be frightening to many people. The stress of limited finances and creditor harassment can cause some to make poor choices, but these choices may only worsen an already serious situation. The way to avoid making further mistakes is to contact a bankruptcy law attorney who knows the right steps to take at every juncture of the process.

Chapter 7 is the most common type of consumer bankruptcy. The idea that it is too difficult to file after the 2005 laws passed is a myth. You can still achieve debt relief through Chapter 7. Contact Florida attorney Norm Schroeder to see what your options are.

Thank you for contacting Norman L. Schroeder, II, P.A. Your message has been sent.

Call us now

or use the form below.

Chapter 7 is a straight bankruptcy where you surrender your assets, and your unsecured debts are discharged.

Unlike what many people think, you will not lose everything you own in bankruptcy. Do not let myths keep you from talking with a West Palm Beach bankruptcy lawyer.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

Discharge Under Chapter 7

"Discharge" in the bankruptcy sense refers to clearing the debtor's slate of all, or most, past debts. Although many people expect that filing for bankruptcy will wipe out all of their debts, that is not always the case. Bankruptcy only discharges certain debts. The availability of discharge depends on the type of bankruptcy proceeding involved, who the debtor is and what type of debts the debtor has. Contact Norman L. Schroeder, II, P.A. in Lake Worth, FL, today to schedule a consultation with a bankruptcy attorney to learn more about which debts will be discharged by a Chapter 7 bankruptcy and which debts will remain.

A discharge does not wipe the slate completely clean, but it does afford great relief

There are a number of prerequisites for obtaining a discharge. In a Chapter 7 liquidation case, if the debtor was in some way dishonest or uncooperative, such as by making fraudulent transfers or failing to keep adequate records prior to filing or by ignoring lawful court orders after filing, the court may deny discharge. In addition, a Chapter 7 debtor cannot have his or her debts discharged under Chapter 7 more than once every eight years. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) provides that in order to receive a discharge, an individual debtor must complete a personal financial management class. 11 U.S.C. § 727.

When a discharge is granted, it protects the debtor from any further liability on the discharged debts. No legal action may be taken against the debtor to collect on discharged debts, and no collection calls or letters may be sent with regard to such debts. A discharge does not actually cancel or extinguish the debt, however; it merely extinguishes the debtor's personal liability. Also, a discharge does not automatically discharge a co-debtor's or guarantor's liability. 11 U.S.C. § 524.

A bankruptcy discharge also has no effect on liens. Take, for example, the situation in which the debtor owes the creditor $5,000 and the debt is secured by the debtor's car, which is worth $3,000. If the debtor files for Chapter 7 relief and receives a discharge, the discharge does not extinguish the creditor's security interest in the debtor's car. In other words, the creditor can still repossess the car. However, it cannot go after the debtor for the $2,000 difference between the debt and the value of the security. That is the personal protection afforded to the debtor by the bankruptcy discharge.

A court may revoke a Chapter 7 discharge if the trustee or a creditor requests it, and if the debtor obtained the discharge through fraudulent means; acquired property that is property of the estate and knowingly failed to report the property or give it to the trustee; or made a material misstatement or failed to provide information in connection with an audit of his or her case. 11 U.S.C. § 727(d).

Debts that remain after a Chapter 7 discharge

Generally speaking, in a Chapter 7 proceeding, the following debts are not discharged:

  • Debts or creditors not listed on the schedules filed at the outset of the case
  • Most student loans, unless repayment would cause the debtor and his or her dependents undue hardship
  • Recent federal, state and local taxes
  • Child support and spousal maintenance (alimony)
  • Government-imposed restitution, fines and penalties
  • Court fees
  • Debts resulting from driving while intoxicated
  • Debts not dischargeable in a previous bankruptcy because of the debtor's fraud

11 U.S.C. § 523.

A note about student loans

Educational loans guaranteed by the United States government are generally not discharged by a Chapter 7 bankruptcy. Student loans may be dischargeable, however, if the court finds that paying off the loan will impose an undue hardship on the debtor and his or her dependents. In order to qualify for a hardship discharge of a student loan, the debtor must demonstrate that he or she cannot make payments at the time the bankruptcy is filed and will not be able to make payments in the future. The debtor must apply before the discharge of the debtor's other debts is granted. Application for a hardship discharge is not included in the standard bankruptcy fees, and must be paid for after the case is filed.

The Bankruptcy Code does not specifically define the requirements for granting a hardship discharge of a student loan. Courts often apply a three-part test to determine eligibility:

  • Income — if the debtor is forced to pay off the student loan, the debtor will not be able to maintain a minimum standard of living for himself or herself and his or her dependents
  • Duration — the financial circumstances that satisfy the income test in (1) will continue for a significant portion of the repayment period
  • Good faith —the debtor must have made a good-faith effort to repay the loan prior to the bankruptcy

Additional Non-Dischargeable Debts

In addition, the following debts are not discharged if the creditor objects during the case and proves that the debt fits one of these categories:

  • Debts from fraud, including certain debts for luxury goods or services incurred within 90 days before filing and certain cash advances taken within 70 days after filing
  • Debts from willful and malicious acts
  • Debts from embezzlement, larceny or breach of fiduciary duty
  • Debts from a divorce settlement agreement or court decree, if the debtor has the ability to pay and the detriment to the recipient would be greater than the benefit to the debtor

Speak to a bankruptcy lawyer

If you have questions about which debts will be affected by a bankruptcy discharge, it is important to seek the advice and counsel of an experienced bankruptcy attorney at Norman L. Schroeder, II, P.A. in Lake Worth, FL.

Copyright © 2017 FindLaw, part of Thomson Reuters

DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

Back to Main

Protecting your assets, saving your home from foreclosure and stopping creditor harassment in south Florida for over 33 years.

Send Norman A Message

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Se Habla Espanol

Norman L. Schroeder, II, P.A.

Palm Beach
6803 Lake Worth Rd Suite 306
Lake Worth, FL 33467
Phone: 561-642-8884
Toll Free: 888-345-4059
Map and Directions

Treasure Coast
201 SW Port St. Lucie Blvd., Suite 4
Port St. Lucie, FL 34984
Phone: 772-405-3429
Toll Free: 888-345-4059
Map and Directions

Satellite Office - Of Counsel
2221 US Hwy 27 S
Sebring, FL 33870
Toll Free: 888-345-4059
Map and Directions

NACBA | National Association of Consumer Bankruptcy Attorneys