Chapter 7 Discharge Explained

While bankruptcy can be a complex legal proceeding, a Chapter 7 Bankruptcy discharge is actually a fairly simple and straightforward concept. The discharge is the end result of any successfully completed Chapter 7 Bankruptcy case. Discharge, simply put, is the elimination of your debt. In other words, upon discharge you will no longer owe to your creditors certain types of debt. In fact, a Chapter 7 Bankruptcy discharge will eliminate the vast majority of consumer debt and provide you with a fresh start.

A Chapter 7 Bankruptcy discharge removes your legal liability on most types of consumer debt and stops all collection efforts by your creditors. You are not required to pay the debt back. A creditor can never collect on that debt again! Ever! So, what happens to your debt once it is discharged? It is not paid back. It is not shifted to anyone else. It is simply wiped out.

Most types of unsecured consumer debt can be eliminated with a Chapter 7 Bankruptcy Discharge. For example, the following debts are typically eliminated with a Chapter 7 Bankruptcy Discharge: credit cards, medical bills, payday loans, unsecured personal loans, utility bills, old cell phone bills, personal signature loans and deficiency balances from repossessed cars and foreclosed homes. What do all of these types of debt have in common? They are unsecured debt. What is unsecured debt? Unsecured debt is debt that is not attached to a particular piece of property, and defaulting on an unsecured debt will not result in the loss of any property. For instance, if do not make your credit card payments the credit card company cannot repossess the items you purchased with the credit cards.

After a Chapter 7 Bankruptcy discharge your creditors cannot resume with any collection efforts. For instance, a creditor cannot file a lawsuit against you for an unsecured debt that was included in a Chapter 7 Bankruptcy discharge. A creditor cannot collect on that debt at all! Also, the debt discharged in bankruptcy is not counted by the IRS as taxable income.

There are some exceptions to a bankruptcy discharge. By law, some creditors can resume the collection of certain types of debt even after a Chapter 7 Bankruptcy discharge. The most common examples of debts that are not discharged by a Chapter 7 Bankruptcy are student loans, domestic support obligations like child support or maintenance payments to an ex-spouse, recent tax debt, debts incurred by fraud, and criminal restitution.

A Chapter 7 Bankruptcy discharge can also help you, to a limited extent, eliminate secured debt. Secured debt is debt that is attached to a piece of property, such as car or home. The most common types of secured debt are loans obtained to help pay for a car or a home. It is “secured” because if you not make the payments the creditor can take away the property. For example, if you do not make your car payments, the creditor has the right to repossess your car. A Chapter 7 Bankruptcy discharge can eliminate secured debt if you are willing to give back the property for which the debt is secured. In the case where you can no longer afford to make payments on a house or car, and you want to walk away, a Chapter 7 Bankruptcy discharge can eliminate the car loan or the mortgage so that you are not stuck paying for the property you no longer own.

A Chapter 7 Bankruptcy discharge is a powerful tool that allows you to wipe out most types of consumer debts, and will provide you with an opportunity to rebuild. To find out what types that you have that of debt a Chapter 7 Bankruptcy discharge can eliminate contact a Legal Helpers attorney immediately.

Understanding Chapter 7