Receiving a Discharge in Bankruptcy
In Chapter 7 and Chapter 13 bankruptcy cases you will automatically receive a discharge at the end of your case on debts which are dischargeable in bankruptcy. In certain circumstances, debt will not be discharged if specific requirements are not met. At Cohen and Cohen we can help you navigate whether the debt you have will be discharged and in complex situations we can help you get a discharge of debt on otherwise non-dischargeable loans, such as student loans.
Chapter 7 versus Chapter 13 Discharge
Chapter 7 bankruptcy has no payment plan. The Chapter 7 case is filed with the court. Your 341 meeting of creditors (“341”) will take place approximately 30 days after your case is filed and then 60 days after your 341 meeting the court will grant a Chapter 7 discharge of your debt.i
In Chapter 13 cases the main difference is that you will make a payment of approximately what you can afford to the Chapter 13 trustee for 3-5 years. Once your payment plan is complete, then any of the dischargeable debts you could not afford to pay are then discharged.ii
Most people are not aware of the Chapter 13 discharge. The perception of Chapter 13 bankruptcy is that you pay back all of your debt. In most cases this is not what happens. You pay a fraction of the debt owed and discharge the remainder. This is a very good benefit for people who want to get out of debt in 3-5 years instead of struggling for multiple decades to pay minimum balances and high interest rates.
Requirements for Receiving a Discharge
The requirements for receiving a discharge in both Chapter 7 and Chapter 13 bankruptcy cases are that
- You have taken the Post-Filing Debtor Education Course and your attorney has filed the course certificate with the court,
- The creditor or trustee does not dispute the dischargeablilty, and
- Your debt is dischargeable.
Post-Filing Debtor Education Course
Each person who files bankruptcy is required to take two education courses. One before your case is filed and one after your case is filed.iii
They are generally taken online and require an hour or two of your time. At the end of the courses you will receive a certificate verifying you have taken the course. Your attorney will then file the certificate with the court. The post-filing certificate is required to be filed with the court prior to you receiving a discharge. If the certificate is not filed with the court, then the court will dismiss your bankruptcy without a discharge.
Creditor or Trustee Disputes Dischargeability
In limited circumstances a creditor may contest the dischargeability of their specific debt. This happens most often, when the creditor argues that they were deceived or defrauded. For example, a client may have a car loan and end-up totaling their car. The bank that lent the money for the car should receive the insurance proceeds to cover their loan. If instead the person who totaled the car spends the money on themselves, they will have potentially defrauded the auto-lender. Examples, like these are few and far between.
Note: The majority of creditors will never show-up to the 341 or take any action.
In other circumstances, the Bankruptcy Trustee may object to you receiving a discharge. Again, this is generally done when a person has tried to deceive the court, for example, they have hidden property they own or failed to disclose property on their bankruptcy schedules. As long as you work with your attorney to make everything accurate, then dischargeability issues should not be a problem.
Your debts are dischargeable unless the debt falls within an exception to dischargeability.iv
Even though some debts may be on the list of non-dischargeable debts they may be dischargeable in certain circumstances. For example, IRS and state tax debts will be dischargeable if they meet certain requirements, such as being older than 3 years. In addition, student loans may be dischargeable if you are mentally or physically disabled and cannot pay them back.
There are other times non-dischargeable debts may be dischargeable. Speaking to an attorney about your specific debt will allow you to get a personalized recommendation for your situation. Here is a list of specific debts and some of the factors that may make a debt non-dischargeable:
- Certain Taxes or Custom Duties – §523(a)(1);
- False Pretenses, False Representations, or Actual Fraud – §523(a)(2);
- Failure to Schedule Creditors in Certain Instances – §523(a)(3);
- Fraud, Defalcation, Embezzlement, or Larceny – §523(a)(4);
- Domestic Support Obligations – §523(a)(5);
- Willful and Malicious Injury – §523(a)(6);
- Fines, Penalties, or Forfeitures – §523(a)(7);
- Educational Loans – §523(a)(8);
- Death or Personal Injury Caused by the Debtor’s Unlawful Operation of a Motor Vehicle While Under the Influence – §523(a)(9);
- Waiver or Denial of Discharge in Prior Case – §523(a)(10);
- Fraud or Defalcation Against Depository Institutions or Insure Credit Unions – §523(a)(11);
- Malicious or Reckless Failure to Fulfill Commitment to Regulatory Agency – §523(a)(12);
- Restitution Orders – §523(a)(13);
- Debts Incurred to Pay Non-Dischargeable Taxes to United States – §523(a)(14);
- Debts Incurred to Pay Non-Dischargeable Taxes to Governmental Unit, not United States – §523(a)(14)(A);
- Debts Incurred to Pay Fines or Penalties under Federal Election Law – §523(a)(14)(B);
- Obligations Incurred in the Course of a Divorce or Separation Other than Alimony, Maintenance, or Support – §523(a)(15);
- Fees or Assessments for Membership Associations Regarding Condominiums or Cooperatives – §523(a)(16);
- Certain Filing Fees, Court Costs, and Expenses – §523(a)(17);
- Support Obligations Owed to a State or Municipality – §523(a)(18); and
- Violation of Federal or State Security Laws – §523(a)(19).
Taking the Next Step to Discharge Creditors
Take the next step to learn more about the dischargeability of your debt. Meet with a bankruptcy attorney at Cohen and Cohen to protect your interests, determine alternatives, or file a bankruptcy to discharge your debt and receive a fresh start.
We Can Help You Protect Your Interests
At Cohen and Cohen, we can help you understand your options, make important legal decisions, and will provide you with professional representation.
Speak to the Bankruptcy Attorneys at Cohen and Cohen to see how our experience can help you.
To schedule an initial consultation to review your case with a Colorado Bankruptcy Attorney at our convenient central Denver location call 303-933-4529.
i 11 U.S.C. § 727 – Discharge
ii 11 U.S.C. § 1328 – Discharge
iii 11 U.S.C. § 109(h) – Who May Be a Debtor
iv 11 U.S.C. § 523 – Exceptions to Discharge
About the Author: Robertson Cohen
Rob Cohen is a Managing Partner of Cohen & Cohen, P.C., serving clients in Colorado and Wyoming. He’s a Chapter 7 Bankruptcy Panel Trustee, certified mediator, and has administered over 8,000 Chapter 7 bankruptcy estates.