What Won't Be Dismissed in Chapter 7

By Heather Frances J.D.

In a Chapter 7 bankruptcy, often called liquidation bankruptcy, a debtor's non-exempt assets are sold to pay the debtor's creditors. Often, a debtor has no non-exempt assets -- or not enough to cover his debts. In such cases, the debtor's remaining, unpaid debts can be discharged, or erased, by the bankruptcy court. Not all debts, however, can be discharged.

Debts Ineligible for Discharge

Most debts are eligible for discharge in Chapter 7 cases, but there are several types of debt that cannot be discharged no matter the circumstances of the case. Debts for spousal or child support, for example, cannot be discharged, nor can some tax debts or other debts to governmental entities. Additionally, debts incurred due to injuries the debtor caused while driving drunk or for malicious injuries to another person or his property are non-dischargeable. Student loan debts are generally not dischargeable unless the debtor meets certain criteria. If your forget to list a creditor on your bankruptcy petition, the court cannot discharge it either. Debtors who are interested in erasing a certain type of debt may wish to check to determine whether the debt is dischargeable before filing bankruptcy.

Discharges Can Be Denied

Chapter 7 debtors do not have an absolute right to receive a discharge, and creditors or the court-appointed trustee can object to the discharge. When a creditor or trustee files an objection, he must be prepared to prove the debtor should not receive a discharge. This is because the trustee will have the burden to provide proof should the objection case go to trial. Discharges can also be denied if the debtor fails to comply with bankruptcy requirements such as failing to complete a financial management course, failing to provide tax documents, violating court orders, or transferring or hiding property with the intent to hinder the proceedings or defraud creditors.

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Getting a Discharge

Bankruptcy courts generally issue Chapter 7 discharges 60 to 90 days after the first creditor's meeting unless someone files an objection. As long as the debtor has met all of the conditions of bankruptcy and no one objects to the discharge, he will receive a discharge of his eligible debts. Federal law requires the court clerk to send a notice of the discharge order to the affected creditors, though the notice does not list the specific debts that have been discharged. It merely makes a blanket statement that all dischargeable debts have been discharged.

Effect of Discharge

Once the court discharges a debt, creditors cannot attempt to collect on that debt. The debtor is no longer liable to pay it, though he can pay it if he chooses to do so. Creditors who continue to attempt to collect a discharged debt can be punished for violating a court order. While discharges are usually final, the court can revoke a discharge if it later discovers the discharge was obtained fraudulently or for other misconduct. For example, if the court later finds out that the debtor was hiding property and did not list all of his assets on the bankruptcy forms, they can revoke the discharge.

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How to File Bankruptcy With Unsecured Debt


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