Some types of debt are dischargeable through bankruptcy. This means that they are extinguished by the bankruptcy court and need not be repaid.
Some types of debt are not dischargeable through bankruptcy. This means that despite successful completion of the bankruptcy proceedings, the debtor must still repay this debt.
Credit card debt is dischargeable and need not be repaid if discharged. Credit card companies are not permitted to attempt to collect repayment of credit card debt if it has been discharged. This means credit card companies are not even permitted to make phone calls or write letters requesting repayment of the debt. Student loans, debts to the Internal Revenue Service for taxes, and court ordered child support payments are not dischargeable even through the completion of successful bankruptcy proceedings.
The Bankruptcy Code
Different chapters of the Bankruptcy Code permit the filing of bankruptcy. Each chapter provides for a different purpose to the chapter, a different course of proceeding through bankruptcy, and a different result to both the debtor and creditors.
The four most common chapters under which bankruptcy may be filed are chapter 7, chapter 11, chapter 12, and chapter 13. Of those four, chapter 7 filings are by far the most voluminous throughout the United States. Of those four most frequent chapters filed, chapter 12 bankruptcy is filed the least. There are other much less common chapters in the Bankruptcy Code under which a bankruptcy petition may be filed as well.
Timing of Discharge
The timing of the discharge varies, depending on the chapter under which the case is filed.
In a chapter 7 (liquidation) case, for example, the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse (60 days following the first date set for the 341 meeting). Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court.
In individual chapter 11 cases, and in cases under chapter 12 (adjustment of debts of a family farmer or fisherman) and 13 (adjustment of debts of an individual with regular income), the court generally grants the discharge as soon as practicable after the debtor completes all payments under the plan.
Since a chapter 12 or chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs about four years after the date of filing.
The court may deny an individual debtor’s discharge in a chapter 7 or 13 case if the debtor fails to complete “an instructional course concerning financial management.” The Bankruptcy Code provides limited exceptions to the “financial management” requirement if the U.S. trustee or bankruptcy administrator determines there are inadequate educational programs available, or if the debtor is disabled or incapacitated or on active military duty in a combat zone.