Bankruptcy Alphabet—D is for Discharge Order

Bankruptcy Alphabet—D is for Discharge Order

 In the world of Bankruptcy, the Discharge Order is the “Holy Grail”.  This is what everyone who files a bankruptcy wants to get.  You should know what a Discharge Order is, and who can get it.

 What is a Discharge Order?

 It is a Bankruptcy Court order signaling the end of the Debtor’s responsibilities.  The Discharge Order is the Bankruptcy Court’s way of telling a Debtor that they are done with their case, and most of their unsecured debts are eliminated.  Unsecured debts are debts such as credit card debt, loans, and medical bills.  They are “unsecured” because they don’t have anything to “secure” the debt, such as a house or car.   Mortgages on a house, and car loans, are not discharged.  Neither are most taxes or student loans.  So, why is the Discharge Order so important?  Because, once you get it, you are not legally obligated to pay any of the unsecured debts, ever!  And, better yet, if some collection company tries to collect on that debt, you can sue them!  

 If you and your attorney do everything right, you can get a discharge order.    You need to follow all the rules in the Bankruptcy Code, complete two required counseling courses, and, most importantly, be honest.  You are required to disclose “list” every company or person you owe (“all creditors”)  and everything you own (“all assets”).   The idea behind this is that the Bankruptcy Code allows “honest but unfortunate” Debtors to get a fresh start.  If you don’t follow all of the rules, or don’t disclose something, you could be denied a discharge. That is why it is so important to tell your attorney everything about your financial situation.  Even if you don’t think it is important.  If it has to do with your money, it is important, because Bankruptcy is about your whole financial situation. 

 It is not necessarily the end of the case, though.  If the trustee finds assets to sell, the trustee could continue to do that, even though you are relieved from your debts.  If the trustee sells the assets, the proceeds would be used to pay a portion of your debts.  Most Debtors are able to protect all of their assets, and the trustee finds that there are not any assets to sell.  Therefore, most Chapter 7 Bankruptcy cases end with the Discharge Order.   

 Who can get a Discharge Order?

  In a Chapter 7 case, an individual can get a Discharge Order after following all of the rules, and full disclosure to the trustee.   Usually, a Debtor can get a Chapter 7 Discharge Order within about 6 months of filing the case.  In a Chapter 13 case, an individual can get a Discharge Order after making all of the required payments and following all of the rules.  The Chapter 13 Discharge Order can happen 3 to 5 years after filing.  

 Who can’t get a Discharge Order? 

 Corporations cannot get a Discharge Order.  Discharges only are for people, to signal to the world that they don’t have to pay debts back.  Corporations cannot get a discharge, and the purpose of a Bankruptcy for a business is to end the business and sell off any assets.  Also, people who are found to have committed fraud by lying on their bankruptcy cannot get a Discharge Order.  Also, if a person files a Chapter 7 Bankruptcy, they can’t get a Discharge in another Chapter 7 Bankruptcy for 8 years.

 Get Discharged!

 So, if you are honest with your attorney and the bankruptcy court, and follow all of the rules, you can get the holy grail of Bankruptcy—a Discharge Order.  The rules are complicated, and if you are thinking of filing Bankruptcy, you are better off consulting with an experienced Bankruptcy Attorney, to give you the best chance of getting the coveted Discharge Order.

 Daniel J. Winter


 53 W. Jackson Boulevard

 Suite 725

 Chicago, IL 60604