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Filing for bankruptcy and when discharge occurs

At times throughout the past decade or so, the struggling economy in Tyler, and across the country, has meant that many people needed to seek various methods of debt relief. Although Texas's economy has done well recently, many people still find themselves in a troublesome financial situation. While filing for bankruptcy is always an option regardless of their personal circumstances, there are certain issues that many people do not fully understand when they make the decision to eliminate debt via bankruptcy. For example, many might not know what a discharge is and when it is completed.

The debtor who received a discharge will no longer be personally liable for certain debts. They will not have to pay them and they are discharged. The creditors who hold the debt cannot take collection actions against the debtor after the discharge has been completed. That includes contacting the debtor or doing anything that could be construed as a renewed attempt at collection. That means no phone calls, emails, letters, or any form of contact. Despite a debtor no longer being personally liable for debts that have been discharged, if there is a valid lien - also known as a secured debt - that was not voided, it will still be in place after the bankruptcy is completed. The secured creditor will be able to try and enforce this lien for recovery.

There are many different forms of bankruptcy and the discharge will vary. With Chapter 7, there is a liquidation. Therefore, the court will usually grant the discharge as soon as the time limits for objection to the discharge have expired. With Chapters 11, 12 and 13, however, the debt discharge may not occur until a few years after the bankruptcy filing.

The U.S. Trustee oversees bankruptcy cases and if a debtor does not adhere to all the requirements of the bankruptcy plan, such as receiving financial counseling, the court may deny the discharge. There are exceptions such as if the debtor is in active military duty and in combat, or if he or she is disabled or incapacitated.

It might sound simple to file for bankruptcy and have the debts "disappear," but that is not how the process works. Those who have accrued debt and are seeking to receive debt relief through bankruptcy must know how discharge works. Having assistance with the entire process from a lawyer can be a key to a successful filing.

Source: uscourts.gov, "Discharge in Bankruptcy - Bankruptcy Basics," accessed on Sept. 15, 2015

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