What Is a Bankruptcy Discharge?

What Is a Bankruptcy Discharge? article image.

A bankruptcy discharge is the legal order that officially releases you from paying back certain debts following a Chapter 13 or Chapter 7 bankruptcy case.

Bankruptcy discharges not only release you from paying back their debts (after meeting all the obligations of the bankruptcy case), but they legally prohibit creditors from taking action to collect outstanding debts. So you shouldn't receive any more letters, phone calls or threats to sue once your bankruptcy has been discharged.

In the case of Chapter 13, the discharge occurs once the debtor completes all the payments set out in the bankruptcy plan. That process can take up to four years. For Chapter 7 cases, discharges are granted around four months after filing a bankruptcy petition with the court—as long as additional objections to the discharge aren't filed.

It's important to know that not all debts can be discharged, and depending on what chapter you file under, you may be responsible for paying outstanding debts even if you've received a discharge.

Read on for more information about which debts can be discharged and what effect the process might have on your credit.

What Debts Can Be Discharged?

Once a debtor has filed for bankruptcy and met the requirements outlined in the chapter under which they filed, they may be eligible to have some of their debts discharged. While not all debts fall into this category, the following are examples of debts that may be discharged.

  • Credit card debt
  • Medical bills
  • Loans from family or friends
  • Business debt
  • Utility bill debt
  • Debts incurred as a result of your willful or malicious injury of an entity
  • Attorney fees
  • Contractual debts
  • Unsecured debt
  • Judgments
  • Civil court judgments
  • Missed rent payments
  • Certain tax debts

What Debts Can't Be Discharged?

Depending on which type of bankruptcy is filed, there are certain types of debts that cannot be discharged. The following types of debt are not dischargeable under the specific chapters listed below.

Chapter 7

  • Criminal fines
  • Car loans
  • Court fees
  • Child support and alimony
  • Debt secured by a lien
  • Court costs
  • Debts that result from you maliciously or willfully injuring another person or entity
  • Debt that results from death or personal injury while driving under the influence
  • Mortgages

Chapter 13

  • Mortgages
  • Child support and alimony
  • Certain tax debts
  • Debt that results from death or personal injury while driving under the influence
  • Criminal fines

The following debts can be discharged, but the discharge may be stopped if a creditor files a motion in court requesting that the debt be declared non-dischargeable.

  • Debt that was a result of fraud
  • Civil court judgements

What Happens After a Bankruptcy Discharge?

Once a final order of discharge is issued in a bankruptcy case, the court clerk will send official copies of the discharge notice to all the creditors involved. This notice is also sent to the trustee (the person appointed to oversee a bankruptcy case) and the trustee's lawyer in addition to the debtor and their lawyer.

The discharge notice is meant to let creditors know that they can no longer contact you asking for payment on your debt. If creditors continue to contact you after a discharge notice has been issued, you can file a motion in court and the creditor may be sanctioned as a result.

However, creditors who provided you with a loan secured by a lien—on property such as a car or home—can attempt to repossess that property after a discharge is issued. If this happens to you, speak with a bankruptcy attorney to learn more about whether you can defend against the action.

How a Bankruptcy Discharge Affects Credit

Once you file for bankruptcy, a record of it will appear in your credit files and will remain there for a period of time. Chapter 7 bankruptcies remain on your credit reports for 10 years from the initial date of filing, and Chapter 13 bankruptcies stay on your reports for seven years from the date of filing.

As long as a record of the bankruptcy is listed in your reports, it will have a negative impact on your credit scores. Once you receive a discharge for the bankruptcy, the record will change in your credit file and a record of the discharge will appear. Each of the accounts discharged as part of the bankruptcy should also be updated to show a zero balance.

If you've received a bankruptcy discharge and do not see a record of it in your credit reports, you can request an update to your credit reports with the three main credit bureaus (Experian, TransUnion and Equifax). To process this update with Experian, you'll be required to provide a "schedule" document from your bankruptcy records to show evidence of the debts included in your discharge.

If you're not sure what appears in your credit file, consider getting a free copy of your credit report and score from Experian to see what's recorded in your credit history. If your report contains any errors, make sure to file a dispute with one or more of the three main credit bureaus to get the mistake removed from your file as soon as possible.