The fourth blog in a four part series about filing for a Chapter 7 or 13 bankruptcy. By Sara E. Cook
A discharge of most debts will be granted if you meet the requirements under the Bankruptcy Code and no one is objecting to the overall discharge, or the discharge of a specific debt. It happens at different times in each chapter and under different circumstances.
The debts to be discharged, that is cancelled and no longer enforceable against the Debtor, are debts that are not secured by liens. Liens will survive the discharge if you decide to keep the property. If you give the collateral back to the creditor, the amounted owed is discharged. Taxes also get special consideration and may not be discharged. Student loans and child support obligations will not be discharged. But credit cards, personal loans, medical bills and similar unsecured debts will usually be discharged.
Under either chapter, the possible impediment to a discharge of debt(s) comes up when an objection to a total discharge is filed or an objection to a specific debt is filed. When a general objection is filed, a discharge will not be automatically granted and the court will have a hearing to determine if the objection should be sustained denying discharge or overruled granting a discharge. These proceedings take months to resolve. If an objection to a specific debt is filed, the Court will grant a discharge to all other debts, and hold a hearing to determine if the specific debt should be discharged. Again, this process can take many months, but will only hold up the specific debt to which there is an objection.
In a Chapter 7, assuming no objection proceedings, the discharge will occur within 60-90 days of the conclusion of the creditors meeting. In a Chapter 13 a discharge will be granted after you have successfully made all plan payments. Once a debt is discharged by the Court, the creditor is prevented from attempting to collect the debt from you and you have no obligation to pay discharged debts. If a creditor repeatedly attempts to collect, you can petition the court to sanction the creditor for violating the discharge.
By discharging debts, you have wiped the slate clean and can be free of the burden of those debts. That is the ”fresh start”. You will have to rebuild your credit reputation, and largely exist with cash. But the bankruptcy will not prevent you from rebuilding your creditworthiness and will allow you to make financial plans without a debt burden holding you back.
At McKenna, Storer we offer up to a free hour consultation, currently by Zoom or telephone, to go over the issues that face you so you can make an informed decision about bankruptcy or alternative strategies. After the initial consultation, if a bankruptcy is decided upon, a comprehensive package of worksheets will be given to you to complete and to begin the process. An initial pre-bankruptcy meeting, again by Zoom, follows to go over and sign the retention agreement, the mechanism for payment of fees and the information for the preparation of bankruptcy schedules. The time line and projected time frame from start to finish will be outlined for you, and you will be on your way to relief from debt. A second pre-filing meeting will confirm the bankruptcy filing information and signing of the petition for bankruptcy. Please contact us at 312.558.3900 for a consultation to see if bankruptcy is right for you.