Bankruptcy Discharge

BANKRUPTCY DISCHARGE IN ALABAMA

A discharge is a court order that releases a debtor from all of his or her dischargeable debts. When a debt is discharged, it is no longer enforceable against the debtor personally.

Collection of Discharged Debts Prohibited

The bankruptcy discharge prohibits any creditors’ attempt to collect from the debtor a debt that has been discharged. For example, a creditor is not permitted to contact a debtor by mail, phone, or otherwise to file or continue a lawsuit, to attach wages or other property, or to take any other action to collect a discharged debt from the debtor. In a case involving community property, there are also special rules that protect certain community property owned by the debtor’s spouse, even if that spouse did not file a bankruptcy case. A creditor who violates this order can be required to pay damages and attorney’s fees to the debtor.

However, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtor’s property after the bankruptcy if that lien was not avoided or eliminated in the bankruptcy case. Also, a debtor may voluntarily pay any debt that has been discharged.

Debts That are Discharged

The chapter 7 discharge order eliminates a debtor’s legal obligation to pay a debt that is discharged. Most, but not all, types of debts are discharged in the debt that existed on the date the bankruptcy case was filed. (If this case was begun under a different chapter of the Bankruptcy Code and converted to chapter 7, the discharge applies to debts owed when the bankruptcy case was converted.)

Debts That are Not Discharged in Bankruptcy Cases

Some of the common types of debts that are not discharged in a Chapter 7 bankruptcy case are:

1. Debts for most taxes;

2. Debts incurred to pay non-dischargeable taxes;

3. Debts that are domestic support obligations;

4. Debts for most student loans;

5. Debts for most fines, penalties, forfeitures, or criminal restitution obligations;

6. Debts for personal injuries or death caused by the debtor’s operation of a motor vehicle, vessel, or aircraft while intoxicated;

7. Debts which were not properly listed by the debtor;

8. Debts that the bankruptcy court specifically has decided or will decide in this bankruptcy case are not discharged;

9. Debts for which the debtor has given up the discharge protections by signing a reaffirmation agreement in compliance with the Bankruptcy Code requirements for reaffirmation of debts; and

10. Debts owed to certain pension, profit sharing, stock bonus, or other retirement plans, or to the Thrift Savings Plan for federal employees for certain types of loans from these plans.

This information is only a general summary of a bankruptcy discharge in Alabama. There are exceptions to these general bankruptcy rules. You should consult a Huntsville or Decatur, Alabama, bankruptcy lawyer to determine the exact effect of the discharge in your case. Call Ferguson & Ferguson now to schedule your free initial consultation. Call 256-534-3435. We can help.

Bankruptcy Discharge Frequently Asked Questions

The following answers provide general information about bankruptcy discharge in Alabama. Bankruptcy cases are fact-specific, and you should speak with an attorney about your individual circumstances.

What is a bankruptcy discharge?

A bankruptcy discharge is a court order that eliminates a debtor’s personal legal obligation to pay qualifying debts. After a debt is discharged, a creditor generally may not attempt to collect that debt from the debtor personally.

What is the bankruptcy discharge injunction?

The discharge injunction is the legal protection that prohibits creditors from attempting to collect discharged debts. It generally prevents collection calls, letters, lawsuits, wage attachments, and other efforts to collect a discharged debt from the debtor personally.

When does a bankruptcy discharge occur?

The timing depends on the bankruptcy chapter and the circumstances of the case. In a typical Chapter 7 case, a discharge may be entered several months after filing. In Chapter 13, discharge usually occurs after completion of the repayment plan and other requirements.

Does a bankruptcy discharge eliminate every debt?

No. Bankruptcy law excludes certain debts from discharge. Common examples include many taxes, domestic support obligations, most student loans, criminal restitution, certain fines, and debts arising from intoxicated-driving injuries.

What debts are usually discharged in Chapter 7 bankruptcy?

Many unsecured debts may be discharged in Chapter 7, including qualifying credit card debts, medical bills, personal loans, utility bills, and certain civil judgments. Whether a particular debt is discharged depends on the facts and bankruptcy law.

Are credit card debts discharged in bankruptcy?

Most ordinary credit card debts may be discharged. Debts involving fraud, false statements, luxury purchases shortly before filing, or certain cash advances may be challenged and may not be dischargeable.

Are medical bills discharged in bankruptcy?

Medical bills are generally unsecured debts and may ordinarily be discharged in Chapter 7 or Chapter 13 bankruptcy, subject to eligibility and other applicable bankruptcy rules.

Are tax debts discharged in bankruptcy?

Some older income tax debts may qualify for discharge if specific filing, assessment, and timing requirements are satisfied. Many recent taxes, trust fund taxes, tax liens, and tax debts involving fraud are not discharged.

Are student loans discharged in bankruptcy?

Most student loans are not automatically discharged. A debtor generally must bring a separate proceeding and establish that repayment would impose the legal standard of undue hardship.

Are child support and alimony discharged in bankruptcy?

No. Child support, alimony, and other domestic support obligations are generally not dischargeable in either Chapter 7 or Chapter 13 bankruptcy.

Are criminal fines and restitution discharged in bankruptcy?

Most criminal fines, penalties, and restitution obligations are not dischargeable in bankruptcy.

Does bankruptcy discharge a mortgage lien?

A discharge may eliminate the debtor’s personal liability on a mortgage debt, but it generally does not eliminate a valid mortgage lien. The lender may retain the right to foreclose on the property if required payments are not made.

Does bankruptcy discharge a vehicle lien?

A discharge may eliminate personal liability for a vehicle loan, but a valid lien generally remains attached to the vehicle unless it is legally avoided or otherwise addressed. A secured creditor may be able to repossess the vehicle if payments are not made.

What is a reaffirmation agreement?

A reaffirmation agreement is a written agreement under which a debtor agrees to remain legally responsible for a debt that might otherwise be discharged. Reaffirmation agreements must comply with Bankruptcy Code requirements.

Can I voluntarily repay a discharged debt?

Yes. A debtor may voluntarily repay a discharged debt. However, a creditor generally may not pressure or force the debtor to repay a debt that has been discharged.

What happens if a creditor contacts me after discharge?

Tell the creditor that the debt was discharged and provide the bankruptcy case information. Keep copies of letters, emails, and account statements, document telephone calls, and promptly contact your bankruptcy attorney.

Can a creditor be penalized for violating the discharge injunction?

A creditor that knowingly violates the discharge injunction may be subject to court sanctions. Depending on the circumstances, the debtor may be able to recover damages, attorney fees, or other relief.

Can a creditor challenge the discharge of a debt?

Yes. A creditor may file a court proceeding challenging dischargeability when it alleges fraud, intentional injury, false financial statements, or another statutory exception. Strict filing deadlines may apply.

Can the bankruptcy court deny my entire discharge?

Yes. A discharge may be denied for reasons such as concealing property, destroying records, making false statements, disobeying court orders, or engaging in other prohibited conduct.

What happens if I forget to list a creditor?

The result depends on the type of case, whether assets were available for distribution, whether the creditor had notice, and whether the debt would otherwise qualify for discharge. A bankruptcy attorney should review the omitted debt.

Does a bankruptcy discharge remove information from my credit report?

A discharge does not immediately remove the bankruptcy or related account history from a credit report. Discharged accounts should generally be reported with no personal balance due, subject to applicable credit-reporting rules.

Can I receive another bankruptcy discharge in the future?

Possibly. Bankruptcy law imposes waiting periods based on the chapter of the prior case, the chapter of the new case, and whether a discharge was entered previously.

Does dismissal of a bankruptcy case discharge debts?

No. Dismissal ordinarily ends the bankruptcy case without discharging debts. Creditors may generally resume lawful collection activity after the automatic stay ends.

Does Ferguson & Ferguson offer free bankruptcy discharge consultations?

Yes. Ferguson & Ferguson offers a free initial consultation for people considering bankruptcy or seeking advice about a bankruptcy discharge. The Huntsville office can be reached at 256-534-3435, and the Decatur office can be reached at 256-350-7200.

Where are Ferguson & Ferguson’s bankruptcy offices located?

The Huntsville office is located at 303 Williams Avenue SW, Suite 321, Huntsville, Alabama 35801. The Decatur office is located at 211 Oak Street NE, Decatur, Alabama 35601.

Huntsville Office Location: 303 Williams Avenue SW Suite 321 Huntsville, AL 35801 Decatur Office Location: 211 Oak Street NE Decatur, AL 35601