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A Fresh Start: the Discharge in Detail

There are several things successful debtors achieve in a chapter 7 bankruptcy – including a stay of creditor activity, exemptions of real and personal property – but the primary purpose of filing a bankruptcy case is the discharge: the permanent elimination of debt. The discharge is what makes bankruptcy’s fresh start possible.

Most debts are dischargeable, and the law’s statements on this topic speak more to what is not dischargeable. The big four types of debt that are usually untouchable in bankruptcy include:

· Recent IRS obligations or tax debts supported by a lien against property;

· Student Loans;

· Child Support; and

· Debts you choose to keep (such as a house or car payment).

Additionally, debts incurred by fraud and certain other specific, unusual debt types are not discharged in a chapter 7 bankruptcy case.

What’s left are the debts typical in many households which are dischargeable: credit cards, personal loans, medical bills, and most of the miscellaneous debts that appear on many credit reports. Therefore, the selection of the appropriate type of bankruptcy (typically, Chapter 7 or 13) is often based on the type and amount of debts owed. If your primary debts are credit cards and you are otherwise suitable for a Chapter 7 case, it is a superior choice to Chapter 13. On the other hand, if your main debts are income taxes or arrears on a house that you intend to keep, Chapter 13 provides a payment mechanism not available to Chapter 7 debtors. Your attorney should discuss these issues as well as your overall goals to help you make the best decision possible.

After the discharge (approximately 4 months after filing a Chapter 7 in most cases; 3 to 5 years from filing a chapter 13), your fresh start is intact – the discharged debts are gone!

At Bailey & Galyen, we are ready to talk to you at your convenience to discuss your financial situation and explain your legal options to get you a fresh start. Please schedule a free initial consultation by calling us toll free at 800-215-9089. If you prefer, you can also fill out our intake form and we contact you to schedule a consultation.