A bankruptcy discharge provides the debtor with a fresh start. It is a court order that releases a debtor from personal liability for certain types of debts that were incurred pre-bankruptcy or pre-petition. Once a bankruptcy discharge issued, the debtor is absolved of any obligation to repay their debts. The bankruptcy discharge voids personal liability on judgments and acts as a permanent injunction against any act to collect a discharged debt as a personal liability of the debtor. The bankruptcy discharge applies only to debts.
A “debt” is defined by the U.S. Bankruptcy Code to mean liability on a “claim,” which is broadly defined to include only debts that were or could have been asserted in the bankruptcy case. A “claim” encompasses most obligations, even those that were disputed, unliquidated, or contingent at the time of the bankruptcy filing. Generally, a bankruptcy discharge only covers pre-petition debts. Most debts incurred by the debtor post-petition, are not affected by the discharge. See 11 U.S.C. §727(b). The bankruptcy discharge does not terminate any lien on a debtor’s property. Even after receiving a bankruptcy discharge, a valid lien can be enforced against assets serving as collateral for the debtor’s debt. Moreover, the liability of a person that is jointly responsible for debt (co-debtor or guarantor), will not be affected by a debtor’s bankruptcy discharge. The reason for this is because the bankruptcy discharge releases a debtor from personal liability, and the protections that bankruptcy affords to a debtor are personal in nature.
In a Chapter 7 bankruptcy, the court will enter a discharge order automatically, approximately after 3-4 months from the date the bankruptcy case was filed, unless an objection was made. In a Chapter 13 bankruptcy, a discharge is only entered after the debtor has completed full performance of the Chapter 13 plan, which lasts 3-5 years. In order to receive a discharge in both a Chapter 7 and a Chapter 13 bankruptcy, an instructional course on personal financial management must be completed. The discharge in a Chapter 13 bankruptcy is broader in scope than a Chapter 7 bankruptcy discharge. Certain types of debt that are excluded from a Chapter 7 discharge are dischargeable in a Chapter 13. Debts dischargeable in a Chapter 13 case, include debts for certain willful and malicious injuries, certain fines and penalties, marital property settlements, and debts as to which a discharge was denied in a prior bankruptcy case. See 11 U.S.C. §1328(a).
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