What Does Bankruptcy Discharged Mean?
If your bankruptcy has been discharged, it means that you are now off the hook for the discharged debts.
You are no longer obligated to pay them.
Depending on your circumstances and what chapter you filed, you may have some, all, or none of your debts discharged.
Any debts that are not discharged are still obligatory.
How Long Does It Take for Bankruptcy to Be Discharged?
How long it takes to get a discharge in bankruptcy depends on under what chapter you filed.
A chapter 7 case typically moves quickly, and you may receive a discharge after 4-5 months.
A chapter 13 bankruptcy will only be discharged after you complete your repayment plan, usually 3-5 years.
Can a Judgement Be Discharged In Bankruptcy?
You may be able to discharge a judgement by filing bankruptcy.
If the lawsuit was filed by a creditor over unpaid dischargeable debts and they have not yet placed a lien on your property, filing bankruptcy may remove it.
If they have placed a lien, then they cannot pursue collection, but will be paid from the proceeds of selling the asset.
If the debt is nondischargeable, filing bankruptcy will not affect it.
What Is Bankruptcy?
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Bankruptcy is a legal proceeding in which a debtor declares their inability to pay back their creditors.
The general idea behind declaring bankruptcy is that it allows debtors a “fresh start” while offering creditors a way to receive some or all of their owed payment.
Although some debts are forgiven, filing for bankruptcy affects the debtor’s creditworthiness.
When filing for bankruptcy, secured debts are usually paid for by the asset “securing” the debt, while many types of unsecured debts can be renegotiated.
Bankruptcy (Ch. 7, Ch. 13, & Ch. 11)
There are three common types of bankruptcy known as “chapters” in the U.S. bankruptcy code, each with varying criteria and consequences:
- Chapter 7 bankruptcy is the most common type of bankruptcy.
It is known as “straight” or “liquidation” bankruptcy.
It is designed to give a “fresh start” by discharging debts that cannot be repaid through the liquidation of the debtor’s assets.
Upon filing Chapter 7, a trustee is appointed to sell the debtor’s non-exempt assets and distribute the proceeds to creditors.
For individuals, the law exempts certain assets such as retirement funds, primary residence, tools for their trade, and personal vehicles from being liquidated to pay back creditors.
This pays back creditors some of what they are owed and protects individuals from having all of their livelihood taken from them.
- Chapter 13 bankruptcy, known as a “Debtor in Possession” bankruptcy, stands in contrast with Chapter 7 because it allows the individuals to keep from liquidating their property.
Chapter 13 creates a new, more affordable payment plan for the debtor to repay creditors, usually lasting 3 to 5 years.
Once the payment plan is finished, the remaining unsecured debts are discharged.
- Chapter 11 bankruptcy is primarily for companies, allowing them a break on paying their debts in order to restructure, come up with new terms for paying their creditors, and become profitable again.
This allows companies to stay afloat while coming up with a new way to pay back creditors.
Chapter 11 is the most complex and expensive form of a bankruptcy proceeding and should therefore be considered after other options have been explored.