A bankruptcy discharge is available to you at the completion of your bankruptcy case. Your debt is erased when you receive the bankruptcy discharge, and the debt is no longer enforceable. However, when you receive a bankruptcy discharge will depend on whether you file for Chapter 7 or Chapter 13 bankruptcy, the two most common forms of personal bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a liquidation proceeding that involves selling your assets to raise funds to become part of the bankruptcy estate. The funds are then used to repay your creditors. In Chapter 7, a bankruptcy trustee is appointed by the court to handle the liquidation of your nonexempt assets. Certain categories of property are exempt from seizure. For example, the bankruptcy trustee is unlikely to seize your vehicle if doing so would impair your ability to work. In addition, many Chapter 7 bankruptcy cases contain no assets to liquidate. This can make the bankruptcy case proceed more quickly than if you had a lot of assets and creditors fighting over who is entitled to the proceeds from the sale of those assets.
Chapter 13 Bankruptcy
In contrast to a liquidation proceeding, filing for Chapter 13 bankruptcy allows you to keep your property. During a Chapter 13 bankruptcy case, you create a repayment plan that takes between three to five years to complete. You must file your proposed Chapter 13 either with your bankruptcy petition, or within 14 days after filing your bankruptcy petition. During the repayment plan, you will make a monthly payment to your Chapter 13 bankruptcy trustee, who is then responsible for distributing the funds to your creditors. The repayment plan must be approved by the bankruptcy court; however, you must begin to make payments toward the repayment plan within 30 days after you file your bankruptcy case, regardless of whether the plan is court approved or not. Usually within 45 days after you file your bankruptcy petition, the bankruptcy judge will hold a confirmation hearing to determine whether your proposed repayment plan is feasible.
Meeting of the Creditors
The meeting of the creditors is held about six weeks after you file for bankruptcy. The meeting is run by your bankruptcy trustee and is informal in nature. According to Section 523 of the Bankruptcy Code, you must provide notice to all of your creditors that you have filed for bankruptcy. Your creditors then have the opportunity to appear at the meeting of the creditors and ask you questions about your financial situation and your bankruptcy petition. After the meeting, your creditors have 60 days to file a motion to object to the discharge of specific debts. However, a creditor rarely files a motion objecting to a discharge within the 60 day period.
A bankruptcy discharge eliminates the debts that are listed in your bankruptcy petition. In addition, the debts will no longer be legally enforceable by your creditors, meaning no new legal actions can be initiated against you after you receive a bankruptcy discharge. However, any debts you did not include as part of your bankruptcy case will not benefit from the bankruptcy discharge. In a Chapter 7 bankruptcy, your debts will be discharged at the end of the 60-day period. For a Chapter 13 bankruptcy, you will receive a bankruptcy discharge at the completion of your repayment plan. In addition, the Bankruptcy Code requires you to complete a financial management course before the court will grant a Chapter 7 or Chapter 13 discharge.