Chicago Bankruptcy Alphabet: D is for Dischargeable Debt

Posted March 8th, 2012 in Blog by admin

A Discharge is almost certainly the primary reason that anyone ever files a Bankruptcy in Chicago .  However, what exactly is a Discharge and what debts does it affect?  As every situation is different, you should consult with a Bankruptcy Attorney to clarify each debt in your case.  Even if you’ve heard that a debt is impossible to get rid of in Bankruptcy, that information may be incorrect, and you should speak with an attorney to determine if that is the case.

What will a Discharge do for me?

In short, a Discharge releases the debtor from personal liability for debts listed in the Schedules.  This means that creditors are no longer allowed to attempt to collect your debts with them.  As such, creditors are prohibited from communicating with you regarding the debt.  This includes restrictions on telephone calls, letters, and personal contact.  If a creditor willingly violates the Discharge, they can be liable to the debtor legally.

The Discharge is a Powerful Tool, but it only applies to Certain Debts.

As you can imagine, there are limitations and exceptions to the benefits of the Discharge.  That means that not all debts are treated equally when it comes to your Bankruptcy.  You should go through your debts with your Chicago Attorney to determine the likely treatment of each one.

Generally speaking, unsecured debts (such as credit cards) are Dischargeable.  However, domestic support obligations (which are also unsecured debts) are not Dischargeable.  This can vary, though, from state to state depending on who the debt is owed to.

Additionally, taxes are sometimes Dischargeable, but that is highly dependent upon the circumstances surrounding the debt owed to the taxing authority.  If the taxes owed are less than three years old or the return has yet to be filed, then almost certainly the taxes are Non-dischargeable.  If you owe taxes, I can not advise you strongly enough to seek the assistance of a skilled Chicago Bankruptcy Attorney such as Lindsey Law Office. Tax Dischargeability involves a complicated analysis that requires attention to detail and a decent amount of time.

Secured debts can be Discharged.  However, if you wish to keep the property to which the debt is linked, you will likely have to Reaffirm the debt instead.  This means that the debt will survive your Bankruptcy, and you will be liable to pay it going forward.  If, on the other hand, you wish to return the property to the creditor (such as a car), then you may receive a Discharge for the obligation.

Finally, student loans are almost never Discharged.  So it is likely you will still have to pay on those obligations following your Bankruptcy.  However, a Chapter 13 Bankruptcy can provide some level of control over the way they are repaid.

Be Careful! You can Lose Your Right to a Discharge.

Sometimes debtors feel that they can outsmart their creditors, and they will try to utilize as much of their credit before they file a Bankruptcy.  Every Bankruptcy Attorney in Chicago has handled a case at one time or another in which the debtor has done this.  Most creditors will catch on to what is happening (many have systems in place to catch this kind of behavior).  After they catch it, the creditors will contact your Attorney, and threaten to file a claim of Fraud with the Court.  This can cause you to lose your Discharge on not only that one debt, but on all of the debt that you listed in your Bankruptcy Schedules.  Therefore, if you are considering filing a Bankruptcy, you would do best to no longer use your credit because it can risk the main purpose of filing:  your Discharge.

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Other D’s in the Chicago Bankruptcy Alphabet: