Debt Discharge: general discharge vs. debt release.

We must ensure that we’re all on the same page when we talk of a “discharge” for bankruptcy. That’s because we can talk about several related but different problems which involve the debtors ‘ general discharge and whether individual debt can be discharged. The trustee or a creditor could challenge debt discharge or the same party can challenge the discharge in general.

General Discharge

In general we discuss the discharge order that Court issues at the end of Chapter 7, or a Chapter 13 case, when bankruptcy lawyers use the term “discharge.” We will often call the general discharge in this order. The general order on discharge signals to the world that the defaulting debtor (the individual who filed the insolvency) was doing what it owed to the laws of insolvency and in turn was exempt from paying more on unpaid accounts.

The general discharge is discussed. It is also important to realize that discharge is a privilege rather than a right. A debtor has to do certain things to show that he has the right to discharge before a discharge can be granted.

The debtor, for example, must submit a complete and honest schedule covering all aspects of its finances. He must attend the creditors meetings, and before he filed bankruptcy, he must not have defrauded his creditors.

Particular Debt Release 

However, not all debts can be unloaded. Although a debtor receives a general release, some of its debts may be exempt from the release. They are not unloadable in the case, in other words.

The general order for discharge unfortunately does not list the debts actually discharged. For both the debtor and the creditors this can be frustrating. On the opposite side of the order itself (or an additional sheet contained in the envelope) the order includes some clarifications telling us what discharge is and provides examples of the types of debts not discharged. In the event of bankruptcy the rule remains that debt is discharged unless one of the four things is true: The instructions cover many things; they contain descriptions such as the debts for most of the taxes and the debts that were not property listing debt.

• It is expressly stated in the Bankruptcy Code that the debt type is not released.
• A creditor lodges a complaint, called an adversary’s proceeding, in the event of contesting the debt release which leads to an insolvency judge’s decision that the debt is not released.
• The debtor reiterates the indebtedness.
• A general release is denied to the debtor.

This is all about which debts in a particular case were actually discharged. This depends on the kind of debt, and in some cases depends on whether a bankruptcy judge has taken action during the case to request a declaration of debt not to be released by a creditor or a debtor. This is frequently referred to as debt discharge.

Therefore, if a debt is to be released, it must be known if something happens in the case where the debt is to be released into a debt that is not.

Find out if a debt has been released

How can you find the answer, if there is a question whether the debt is being released? The best way to determine this is by asking a lawyer who knows the case. This may be the defense lawyer representing the debtor or someone accessing the case file. Case files are public documents and are generally available online for a fee via the PACER system of the Federal Court.

You should seek legal advice before taking action to collect the debt if you’re a creditor and have questions whether the debt was discharged. It can be a costly lease if you try to collect a debt that has been discharged, because the court could disregard you and make you pay damages to debtor.