At the end of your Chapter 7 bankruptcy case, you will hear the term bankruptcy discharge. But what does this mean exactly?
A Chapter 7 bankruptcy discharge releases you, the debtor, from the personal liability of most debts while preventing your creditors from taking action against you. Due to the fact that Chapter 7 discharge is eligible for many exemptions, it is important to consult with a bankruptcy attorney such as The Law Office of Brent M. Myer, PLLC in order to discuss the scope of your potential discharge.
In most cases, excluding those that are dismissed, nearly 99% of all Chapter 7 bankruptcy debtors will receive a discharge under this chapter. In a majority of cases, unless your creditors files a complaint against the discharge or submit a motion to extend the time to object which is possible, the bankruptcy court in which you filed will issue a discharge order between 60-90 days after the first set date of your meeting. Fed. R. Bankr. P. 4004(c).
During a Chapter 7 bankruptcy case, there are narrow margin for denying you, the debtor, a discharge. The most common reasons that the court may deny the debtor a discharge are as follows:
- You have failed to keep or produce adequate books or financial records
- Failure to explain satisfactorily any loss of your assets
- You have previously or currently committed a bankruptcy crime such as perjury
- Failure to obey a lawful order of the bankruptcy court
- Fraudulently transferred, concealed or destroyed property that would have become part of the estate
- Failure to complete the approved instructional course concerning financial management
Secured creditors may reserve some rights to seize property that was previously used to secure underlying debt even after the discharge is granted. However, depending on the individual circumstances, if you, the debtor, would like to keep certain secured properties such as your vehicle, you may choose to reaffirm the debt. This reaffirmation is an agreement between you and your creditor that you will remain liable for the debt and will pay all or a portion of the money you owe, even though this debt would otherwise be discharged during your chapter 7 bankruptcy discharge. In response to your reaffirmation, your creditor will promise that it will not repossess or take back the automobile or other property as long as you continue to pay toward your debt.
If you decide that you would like to reaffirm a debt, you must do so before the discharge is entered. You are required to sign a written reaffirmation agreement and file this agreement with the court. The Bankruptcy Code requires that the reaffirmation agreement contains an elaborate set of disclosures. These disclosures must advise you of the amount of debt that is being affirmed and how this amount is calculated. The disclosures much also include that you, the debtor, is personally liable for the debt and that it will not be discharged through the bankruptcy. You will be required to sign and file this statement along with a statement of your current income and expenses which will reflect the balance of your income is reasonable to pay this debt. If the balance reflected in the disclosure is not enough to pay the reaffirmed debt, there will be a presumption of the undue hardship and the court may deny your request for affirmation. However, if you are represented by a lawyer, the bankruptcy judge is required to approve the reaffirmation agreement. This is why the Law Office of Brent M. Myer, PLLC recommends seeking legal counsel regarding Chapter 7 bankruptcy.
If you are represented by an attorney such as the Law Office of Brent M. Myer, PLLC, Mr. Myer must certify in writing that he advised the debtor of the legal ramifications of the agreement including a default under the signed agreement. The Law Office of Brent M. Myer, PLLC must also certify that you, the debtor, was fully informed and voluntarily made the agreement. In addition, your lawyer will also certify to you that the reaffirmation of the debt will not create an undue hardship for you or your dependents.
If you are not represented by an attorney, the Bankruptcy Code requires a reaffirmation hearing during the negotiating of the agreement, or if the court disapproves the reaffirmation agreement. You may still choose to repay any of your debts voluntarily with or without a reaffirmation agreement, however, your secured creditors are not legally obligated to allow you to maintain possessions.
Under a Chapter 7 bankruptcy case, you, the debtor, will receive a discharge of most of your debts. When you receive a discharge, your creditors may no longer initiate or continue to pursue any legal actions against you, the debtor.
Not all of your debts will typically be discharged in Chapter 7 bankruptcy. Debts that are not discharged during these cases include the following:
- Debts for alimony
- Child support
- Certain taxes
- Debts for certain education benefit overpayments or loans made or guaranteed by a government unit
- Debts associated with willful or malicious injury by the debtor to another person or establishment
- Debts for death or personal injury caused by the debtor’s operation of a motor vehicle while the debtor was under the influence of drugs or alcohol
- Debts related to certain criminal restitution orders
You will continue to be liable for these debts even under a Chapter 7 bankruptcy case. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared no dischargeable.
The court does reserve the right to revoke a chapter 7 discharge upon the request of the bankruptcy trustee, your creditors or the U.S. trustee if your discharge was obtained through fraud as well as if you acquired property that is the property of the estate and you knowingly and fraudulently failed to report the acquisition of the property. This loophole also rings true if you failed to surrender the property to the trustee. You may also have your chapter 7 discharge revoked if you make a material misstatement or fail to provide documentation in connection with an audit relating to your case.
It is important to understand the full extent of your bankruptcy case in order to experience a seamless debt discharge process. To schedule your free bankruptcy consultation with The Law Office of Brent M. Myer, PLLC call (772) 873-7794