Chapter 7 Bankruptcy in 7 Steps: The Bankruptcy Discharge

The day you receive your bankruptcy discharge is similar to those Christmas mornings back when you were a kid.  You wait and wait for the day to arrive, and then, finally it arrives.  Your discharge is entered.  All those days, months, and even years of enduring collection calls, lawsuits, garnishments, and all the other list of debt collecting horribles has led to this final day of freedom.

In Arizona you can expect to receive your discharge to be entered approximately 60-90 days after the Meeting of Creditors - or about 4 to 5 months after your chapter 7 bankruptcy case is filed.  While the entry of the discharge order signals the elimination of your debts, it is not necessarily the end of your bankruptcy case.  Your case will not be completely over until the bankruptcy court administratively closes your case.  In most cases this usually happens a few days to a month or so after the discharge has been entered.  Why would it be held open?  If your bankruptcy trustee needs additional documents from you that you haven’t provided (usually tax returns) or if there are assets that are being sold to pay your creditors, your case will be held open until those matters are finalized.

What Does the Bankruptcy Discharge Really Mean?

The discharge is an official court order signed by your bankruptcy judge.  It literally eliminates (or discharges) those debts that are eligible to be discharged – typically your credit cards, medical bills, etc. that you had before your bankruptcy case was filed.  It does not eliminate any debts you may have incurred after your bankruptcy case was filed.  The discharge order also acts an injunction against your creditors.  This means that not only are your debts eliminated but that your creditors can never again try and collect on the discharged debt from you.

But what if they do?  Periodically a creditor will ignore the discharge entered by the court and continue to try and collect on a debt.  This is rare and most often is done inadvertently by a creditor and the problem can be solved with a simply letter from my office.  However, on rare occasions you get a creditor who either doesn’t care or doesn’t understand the bankruptcy system and continues to plow ahead trying to get money out of you.  The bankruptcy court can and will penalize those creditors who ignore the discharge.  Recently in a case of mine a creditor continued to automatically withdraw money out of my client’s bank account on a debt after the discharge had been entered.  Even after several notices they continued to withdraw the money.  The bankruptcy made them refund the money, pay my attorney’s fees, and issued a $100 per day penalty until it was done!

Well…you did it.  You made it through the bankruptcy process, you obtained your discharge, and now you are good to go.  But there is one last step that we need to discuss, and it will be the subject of my next article: how long will it take you to recover from bankruptcy?

photo by: kalyan02