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Looking at discharge in Chapter 7 and Chapter 13 bankruptcy

In our last couple posts, we've been looking at some of the basic features of Chapter 7 and Chapter 13 bankruptcy, focusing particularly on financial eligibility requirements and the general process by which these forms of personal bankruptcy work.

One particularly important issue in any form of personal bankruptcy is discharge, which is the usual culmination of both Chapter 7 and Chapter 13 bankruptcy. With both forms of bankruptcy, debtors receive a discharge most of the time, but there are certain requirements and exceptions.

Chapter 7 discharge is subject to various exceptions, though the grounds for denying discharge are narrow and the burden is upon the moving party-usually a creditor or the trustee-to prove that denial of discharge is proper. Some examples of circumstances which could lead to a denial of discharge would be: failure to keep or produce adequate books or financial records; failure to satisfactorily explain loss of assets; failure to obey an order of the bankruptcy court; failure to report the acquisition of property; and fraudulent transfer of assets.

Not all debts qualify for discharge. Examples of those which may not be discharged include spousal support and child support debts, certain taxes, student loan debt, debts for willful and malicious injury to another or to property, and wrongful death or personal injury debts caused by drunk driving. Chapter 13 bankruptcy does put various conditions on discharge, but the scope of discharge is slightly broader than in Chapter 7 bankruptcy.

Timing of discharge is different in Chapter 7 and Chapter 13 cases. Whereas a discharge order in Chapter 7 cases is usually issued 60 to 90 days after the first meeting with creditors, discharge in Chapter 13 cases only occurs after the three to five year repayment plan is completed.

Of course, in either type of case, it is critical to work with an experienced attorney to navigate the process and to ensure strong representation in court. A skilled advocate can help ensure that the process goes as smoothly as possible and can work to ensure that the debtor reaps the benefits of the bankruptcy process.

Sources:

U.S. Courts, Chapter 7-Bankruptcy Basics, Accessed Aug. 18, 2016.

U.S. Courts, Chapter 13-Bankruptcy Basics, Accessed Aug. 18, 2016.

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