How A Bankruptcy Discharge Works
A bankruptcy discharge provides relief to a debtor, as it means they are no longer legally required to pay back debts that have been discharged. The subject of a bankruptcy discharge must meet certain requirements before it is granted, and the timing of the discharge varies based on the type of bankruptcy filed.
The court typically grants the discharge as soon as possible. Chapter 7 bankruptcies generally receive a discharge after about four months from the time the bankruptcy petition is filed, while a Chapter 13 bankruptcy discharge is issued after the debtor completes all payments under the plan. This is normally between three and five years.
An individual debtor under Chapter 7 bankruptcy is usually granted a discharge however, the right to a discharge is not guaranteed. For instance, there may be pending litigation involving objections to the discharge.
The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the U.S. trustee, the trustee in the case, and, if one exists, the trustees attorney. The debtor and the debtors attorney also receive copies of the discharge order.
The notice is simply a copy of the final order of discharge and is not specific to the debts the court determines should not be covered by the discharge. The notice informs creditors that the debts owed to them have been discharged and they should not attempt any further collection.
How Long Does Bankruptcy Stay On Your Credit Report
Your bankruptcy will be listed in your credit report which may mean it will be harder for you to get credit. The bankruptcy can stay on your credit report for at least 6 years from the date you were declared bankrupt. This period can be longer if your bankruptcy continues. Once the bankruptcy is removed you will be able to apply for credit.
How Do I Get Discharged From My Bankruptcyupdated November 30
Question & Answer
You are discharged from your bankruptcy when you get an order that says you no longer have to pay most of the debts you owe. This means most of your debts will be erased and you will not have to pay any more money to most of your creditors. Once you are discharged, your bankruptcy ends.
In some situations, you will get an automatic discharge. And sometimes you have to go to court to be discharged. In most first bankruptcies, you receive an automatic discharge
For a first bankruptcy, you can be automatically discharged after:
- 9 months if you do not have to make surplus income payments, or
- 21 months if you are making surplus income payments.
If you have filed twice for bankruptcy, you will get an automatic discharge after 24 months. If you are making surplus income payments and you have been bankrupt before, you will be bankrupt for at least 36 months.
Until you are discharged, you will still owe money to your creditors.
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How Can The Debtor Obtain Another Copy Of The Discharge Order
If the debtor loses or misplaces the discharge order, another copy can be obtained by contacting the clerk of the bankruptcy court that entered the order. The clerk will charge a fee for searching the court records and there will be additional fees for making and certifying copies. If the case has been closed and archived there will also be a retrieval fee, and obtaining the copy will take longer.
The discharge order may be available electronically. The PACER system provides the public with electronic access to selected case information through a personal computer located in many clerk’s offices. The debtor can also access PACER. Users must set up an account to acquire access to PACER, and must pay a per-page fee to download and copy documents filed electronically.
Are All Of The Debtor’s Debts Discharged Or Only Some
Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523 of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those debts after bankruptcy. Congress has determined that these types of debts are not dischargeable for public policy reasons .
There are 19 categories of debt excepted from discharge under chapters 7, 11, and 12. A more limited list of exceptions applies to cases under chapter 13.
Generally speaking, the exceptions to discharge apply automatically if the language prescribed by section 523 applies. The most common types of nondischargeable debts are certain types of tax claims, debts not set forth by the debtor on the lists and schedules the debtor must file with the court, debts for spousal or child support or alimony, debts for willful and malicious injuries to person or property, debts to governmental units for fines and penalties, debts for most government funded or guaranteed educational loans or benefit overpayments, debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated, debts owed to certain tax-advantaged retirement plans, and debts for certain condominium or cooperative housing fees.
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How Discharge Affects Your Belongings
Discharge from bankruptcy doesn’t mean you’ll get back any belongings, even if they haven’t been sold yet. It might take some time for the official receiver to deal with them.
If you come by any new assets after you’ve been discharged, these will usually remain yours and can’t be claimed by the trustee. An important exception to this rule is any payments you receive by claiming for payment protection insurance which was mis-sold before you become bankrupt.
Phase : Filing Date 341 Meeting Of Creditors
The 341 meeting is scheduled about 30 days after the petition date. The meeting itself typically takes less than 10 minutes to complete.
While waiting for your 341 meeting, youâll likely hear from your trustee. Theyâll let you know what documents they need from you to prepare for your 341 meeting. As long as youâve kept the documents you used when preparing your bankruptcy forms, doing this shouldnât take very long.
Most filers also get the financial management course out of the way while they wait for their 341 meeting. Bankruptcy law requires every person filing bankruptcy to complete this education course. It tends to be a little longer than the first course, usually around 2 hours.
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What Will Still Be Affected After Discharge
Once you have been discharged there are two main things that will return to normal
- You will once again be able to act as a company director, unless there is another reason which disqualifies you from doing so.
- Any assets you gain after you have been discharged will be your own and will not be used to contribute towards your debts held under the existing bankruptcy.
But while life should slowly begin to get back on track after youve been discharged, there are still some things that will be affected by the bankruptcy
Reopening Your Bankruptcy Case After It’s Over
You, the trustee, or your creditors can ask the court to reopen your bankruptcy case. But why would someone want to reopen it?
You might want to reopen it if you accidentally forgot to list a debt or if a creditor is violating your discharge. In these situations, you could ask the court to reopen your case and address these issues.
Or, suppose someone suspects that you provided false information on your bankruptcy papers or didn’t disclose all of your property. The court could reopen your case to evaluate the claim, and, if necessary, instruct the trustee to administer those assets. The court could even revoke your discharge.
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Asset Chapter 7 Cases Take Longer
If the case involves assets the trustee needs to sell, the case could go on for months or years after the discharge. The amount of time will depend on whether the Chapter 7 trustee needs to file lawsuits against creditors or others or sell assets like real estate, vehicles, or businesses.
Once the trustee has a pool of funds, the court will ask the for what the debtor owes. The trustee will file objections with the court to any claim that is deficient or improper, and the court will hold hearings on them. The trustee mails checks to those creditors with allowed claims and will file a report after distributing funds. Only then will the court close the case.
Reasons Why A Discharge From Bankruptcy May Be Opposed And Possible Penalties
The Bankruptcy and Insolvency Act gives creditors the right to oppose the discharge and appear in court to give their reasons why there should be a further penalty or paying more money, having the discharge postponed, or some other penalty.
Section 173 Facts:
Fact: Debtor was previously bankrupt or filed a proposal.
Probable penalty: If previous bankruptcy or proposal was:
5 10 years ago, discharge takes an additional 6 months More than 10 years ago, discharge takes an additional 3 months
Fact: The bankrupt has not paid the payments required under the Superintendents guidelines.
Probable Penalty: Discharge is delayed until the funds are paid
Fact: The bankrupt could have filed a viable proposal.
Penalty: The trustee recommends that the payments required under the Superintendents guidelines continue for 12 more months.
Fact: The unencumbered assets are worth less than 50 percent of the unsecured debt, unless it is for reasons for which the bankrupt cannot be held responsible.
Penalty: This is a catch all reason for getting the matter into court, usually used by creditors and not trustees.
Fact: The bankrupt has continued to trade after becoming aware of being insolvent.
Penalty: This is seldom used.
Fact: The bankrupt has been guilty of any fraud or fraudulent breach of trust
Penalty: The trustee can make a recommendation but it is common that the penalty is set by the court and can be the payment of monies and/or a delay in time before the discharge.
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Bankruptcy Discharge What Happens Next
If you declare yourself bankrupt, or youre declared bankrupt, youll usually be discharged 12 months from the date the bankruptcy order was made.
The discharge process is automatic and will usually come to an end after a year. However, if youve not cooperated and been completely honest with your official receiver or trustee, or youve not acted responsibly during your bankruptcy, it might not end at this time. This is known as a delayed discharge or suspended discharge and can extend your bankruptcy for up to 15 years.
Once youve been discharged from your bankruptcy, youll be free of some of the financial restrictions imposed by the order, meaning:
- You can now act as a company director, unless there is another reason why you cant hold that position.
- You no longer have to worry about any assets, pay rises, bonus payments or other windfalls being used to pay creditors. An exception to this is any payment protection insurance mis-selling compensation payments, from claims made before your bankruptcy.
Its worth noting that you wont be sent confirmation of your bankruptcy discharge, but you can get proof of your discharge by getting a free confirmation letter by calling discharge queries on 0300 678 0015.
Here are some useful next steps for after bankruptcy:
Why A Case Isn’t Over After A Bankruptcy Discharge
Most people file for bankruptcy for the debt discharge. It’s the last court action that directly affects many filers, so, understandably, they think the case is over once it’s received. It’s also confusing that, in many instances, the court will close the case soon after the entry of discharge. But the discharge order and case closure are different.
The bankruptcy discharge releases the debtor from liability for certain debts, so the debtor is no longer legally required to pay the balance. The discharge also prohibits creditors from collecting discharged debts in any manner, including through lawsuits, demand letters, and telephone calls.
In some cases, the bankruptcy will continue for some time after the discharge order is issued. In fact, for creditors, the trustee, and the court, the case could be just getting underway.
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Your Responsibilities Aren’t Over After You Receive Your Bankruptcy Discharge
Complex bankruptcy casesthose involving significant property sales or ongoing lawsuits called adversary proceedingsremain open for quite a while after the court grants your discharge. The court won’t close your case until the trustee administers all bankruptcy estate property and files a final accounting.
Here’s the kickeruntil the court closes your case, you must cooperate with the trustee. Some of the things you might have to do could include:
- turning over property you couldn’t protect with a bankruptcy exemption
- responding to discover or appearing at 2004 examination , or
- testifying in or defending yourself in a motion hearing or adversary proceeding.
Getting Public Records Changed
After discharge from bankruptcy, your details will still be included in several public records. Some of these will be removed automatically after a certain time, while you’ll need to take action to get others changed, as follows:
- your details will automatically be removed from the Insolvency Register 3 months after your discharge
- if you want your credit record to show you’ve been discharged, you should send confirmation to each of the credit reference agencies and ask them to update your file – remember the bankruptcy will show on your file for 6 years after the bankruptcy order
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Three: Avoid Unnecessary Post
The main traps for post-discharge debtors are the temptation to open too many credit accounts, incurring too much debt, and late payments.
Too many accounts
Although most debtors can obtain post-bankruptcy loans and credit accounts, you must be careful. I do not recommend obtaining multiple credit accounts after bankruptcy to try to improve your credit score. Some post-bankruptcy debtors believe that the more accounts they open, the faster they will rebuild their credit. That mindset is a recipe for disaster. With few exceptions, debt is not your friend. One or two credit cards combined with some other form of credit, such as a personal line of credit or modest car loan, should be enough for anyone.
Keep in mind that each time you apply for credit, the inquiry reduces your score a bit. Too many inquiries on your credit report and you will start to look irresponsible. Moreover, if you have too many accounts, you may be tempted to over-utilize credit, which may severely damage your income-to-debt and debt-to-available-credit ratios . The key to rebuilding your credit score is the responsible use of credit and living within your means.
Too Much Debt
Understanding the Debt -to-Available-Credit Ratio. Just as important is the debt-to-available-credit ratio, which measures the percentage of available credit that you use compared to your overall available credit.
Can I Get A Mortgage Or Other Loan After Bankruptcy
While your bankruptcy will remain on your credit report after you are discharged, you can apply for personal bank loans and car loans. These are private loans provided at the discretion of the lenders. Some lenders may require that you obtain a guarantor for your loan. Like all new credit, you should review the terms and conditions to make sure you understand them, including the interest rates and repayment terms, so that you are confident you can afford the payments within your budget.
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Will Your Discharge Be Opposed
The discharge from bankruptcy is usually granted if you are earning only enough income to keep yourself and your dependants reasonably provided for, and if you have received .
Occasionally, creditors, the Trustee, or the Superintendent of Bankruptcy oppose a bankrupts discharge. When this happens, the matter goes to mediation or is heard in Court. Opposition to discharge is not common, but can happen if it is believed that you did not deal honestly with your creditors or with the Trustee, or if you have not completed your duties in bankruptcy.
How Long Does It Take To File A Chapter 7 Bankruptcy Case
There are a few things youâll have to do before you can file bankruptcy. How long this takes depends entirely on how quickly you move through the steps. Some people take weeks or even months to get ready others get it done in the span of a week. Hereâs a breakdown of these pre-filing steps:
Gathering information: Youâll need to collect some documents, like your tax returns and paycheck stubs so you can submit them to the court and/or the trustee. But, youâll also need to have information about how much you spend on living expenses, what your assets are and how much theyâre worth.
Taking credit counseling: This course has to be completed in the 180 days before your bankruptcy petition is filed with the court. It usually takes only 1 hour.
Completing the bankruptcy forms: This is often the longest part of the process. Folks working with a law firm wait for the lawyerâs office to complete this step. Once done, they’ll meet with the bankruptcy lawyer to sign their forms. Folks filing on their own can take several hours to fill out the bankruptcy forms. Upsolve users typically take a total of about 3 hours to provide the information needed to generate their forms.
Filing the forms with the court: How long this takes depends on whether you go to the bankruptcy court in person or mail it in. Due to COVID-19, some courts have started accepting forms through electronic means, like sending an email or uploading the documents through a portal.