Discharge in Bankruptcy

One of the main aims of United State bankruptcy law is to give a fresh start to honest debtors . To quote the United State Supreme Court, "It gives to the honest but unfortunate debtor...a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt." Courts achieve this by discharging the debtor of personal liability for certain types of debt. Any insolvent individual or businesses entity willing to honestly disclose all incomes, assets, and liabilities may take advantage of this relief. Once the debtor receives the discharge he can no longer be subject to any collection action on the part of the creditors for the discharged debts. Most taxes, government and court fines, child support and alimony payments, are some of the debts that can not be discharged. Discharge will not effect a valid lien as permitted by the bankruptcy court and the creditor concerned is allows to enforce it to recover the debt.

Chapters in the Bankruptcy Code

The bankruptcy discharge granted will depend on the type of bankruptcy case. United States Bankruptcy Code allows for various types of cases according to the state of the debtor. They are usually named after the chapters describing them in the code.

In a chapter 7 case, where the debtors assets are liquidated and distributed by a trustee the court grants the discharge promptly, once the period for filing objections has expired. A debtor can expect to receive the discharge in about four months after filing for bankruptcy In chapters 12 and 13 cases, as well as chapter 11 cases that involve individuals, the discharge is granted when the court approved repayment plan is completed. Repayment plan typically lasts from three to five years. If the debtor fails to complete the plan due to circumstances beyond his control he may be granted a "hardship discharge" in some limited number of cases. Court may depending on the situation require the debtor to follow an education program for financial management before grating the discharge.

In chapter 7, a creditor, the trustee in the case, or the U.S. trustee, can file objection to the grant of discharge on account of reasons set forth in section 727(a) of the Bankruptcy Code. They include transfer of property with intent to hinder or defraud creditors, destruction records, perjury, unaccountable for the loss of assets, among others. Burden of proof falls on the objector. In chapter 12 and 13, the objection must be made before the confirmation of the repayment plan. Court will deny a second discharge if the debtor has recently received a discharge. Exact period that must elapse before a second discharge is allowed depends on the case type and vary from eight to two years.

Court may revoke a bankruptcy discharge if a creditor or the trustee files a petition to revoke within one year after the grant of discharge and proves that debtor has performed improprieties set out in section 727(a)(6) of the Bankruptcy Code.

A creditor who disregards the discharge injunction can be sanctioned by the court and held in contempt. Neither the government or the private enterprises are allowed to discriminate against debtors who have received a discharge in bankruptcy.

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