Discharge in Bankruptcy
One of the main aims of United State
bankruptcy law is to
give a fresh start to honest debtors . To quote the United State
Supreme Court, "It gives to the honest but unfortunate
debtor...a new opportunity in life and a clear field for future
effort, unhampered by the pressure and discouragement of
preexisting debt." Courts achieve this by discharging the debtor
of personal liability for certain types of debt. Any insolvent
individual or businesses entity willing to honestly disclose all
incomes, assets, and liabilities may take advantage of this
relief. Once the debtor receives the discharge he can no longer
be subject to any collection action on the part of the creditors
for the discharged debts. Most taxes, government and court
fines, child support and alimony payments, are some of the debts
that can not be discharged. Discharge will not effect a valid
lien as permitted by the bankruptcy court and the creditor
concerned is allows to enforce it to recover the debt.
Chapters in the Bankruptcy Code
The bankruptcy discharge granted will depend on the type of
bankruptcy case. United States Bankruptcy Code allows for
various types of cases according to the state of the debtor.
They are usually named after the chapters describing them in the
code.
In a chapter 7 case, where the debtors assets are liquidated
and distributed by a trustee the court grants the discharge
promptly, once the period for filing objections has expired. A
debtor can expect to receive the discharge in about four months
after filing for bankruptcy In chapters 12 and 13 cases, as well
as chapter 11 cases that involve individuals, the discharge is
granted when the court approved repayment plan is completed.
Repayment plan typically lasts from three to five years. If the
debtor fails to complete the plan due to circumstances beyond
his control he may be granted a "hardship discharge" in some
limited number of cases. Court may depending on the situation
require the debtor to follow an education program for financial
management before grating the discharge.
In
chapter
7, a creditor, the trustee in the case, or the U.S. trustee,
can file objection to the grant of discharge on account of
reasons set forth in section 727(a) of the Bankruptcy Code. They
include transfer of property with intent to hinder or defraud
creditors, destruction records, perjury, unaccountable for the
loss of assets, among others. Burden of proof falls on the
objector. In chapter 12 and 13, the objection must be made
before the confirmation of the repayment plan. Court will deny a
second discharge if the debtor has recently received a
discharge. Exact period that must elapse before a second
discharge is allowed depends on the case type and vary from
eight to two years.
Court may revoke a
bankruptcy discharge if
a creditor or the trustee files a petition to revoke within one
year after the grant of discharge and proves that debtor has
performed improprieties set out in section 727(a)(6) of the
Bankruptcy Code.
A creditor who disregards the discharge injunction can be
sanctioned by the court and held in contempt. Neither the
government or the private enterprises are allowed to
discriminate against debtors who have received a discharge in
bankruptcy.
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