Process of Bankruptcy Discharge and Impact for Debtor

A bankruptcy discharge exempts the debtor from being held personally liable for a list of specific debts. In other words, any discharged obligations are no longer enforceable against the debtor. 

A permanent injunction called a discharge forbids the debtor’s creditors from engaging in any type of debt collection activity, including going to court and contacting the debtor directly through phone calls, letters, or in-person meetings.

Although a debtor is not held personally accountable for discharged debts, any lawful liens that have not been avoided (i.e., rendered unenforceable) in the bankruptcy case will continue to exist after the bankruptcy case. 

Consequently, a secured creditor has the right to pursue the lien in order to reclaim the assets it has secured by the approval of ‌bankruptcy lawyers.

When will you be Released from Bankruptcy?

On the first anniversary of the day the bankruptcy order was issued, you will often be freed from bankruptcy after 12 months. You might sometimes be released later.This is referred to as “delayed discharge.” Utilize the Individual Insolvency Register on GOV.UK to look up the date of your discharge.

Delayed Release

An “official receiver” from the Insolvency Service is in charge of your bankruptcy during the bankruptcy period. You owe it to them to cooperate, which could include providing information when requested. In the event that you fail to comply, the official receiver may request that the court halt your discharge. The term “suspension of discharge” refers to this.

The court will inform you if there is anything you need to do to obtain your discharge if your bankruptcy discharge is suspended.

When your Agreement for Income Payments Expires

An income payments agreement or order that requires you to make payments typically has a three-year term and will continue to be in effect after your discharge.

You may request a modification of the agreement or order if your income changes in any way.

How is a Discharge Obtained by the Debtor?

The debtor will often automatically receive a discharge unless there is litigation regarding objections to the discharge. The U.S. trustee, the trustee in the case, and the trustee’s counsel, 

if any, are required to receive a copy of the order of discharge by mail from the bankruptcy court clerk, according to the Federal Rules of Bankruptcy Procedure.

Copies of the discharge order are also given to the debtor and the debtor’s lawyer. The notice, which is only a copy of the final discharge order, may be vague about the debts that the court concluded were not dischargeable, or not included in the discharge. 

The notification notifies all creditors that their debts have been dismissed and that they shouldn’t make any more attempts to collect them. The warning alerts them that if they keep up their collection attempts, they might be punished for contempt. 

The legality of the order granting the discharge is unaffected by any unintentional failure on the part of the clerk to send a copy of the discharge order to the debtor or any creditors as soon as possible and within the time frame stipulated by the regulations.

Can Creditors Contest the Discharge or Does the Debtor Have the Right to One?

The debtor does not always have the right to a discharge in chapter 7 situations. A creditor, the trustee handling the case, or the U.S. trustee may all oppose the discharge of the debtor.

Soon after the case is filed, creditors receive a notice that contains critical details, including the time for filing an objection to the discharge. A creditor must submit a complaint in the bankruptcy court within the deadline specified in the notice in order to contest the debtor’s discharge.

A lawsuit known as a “adversary process” in bankruptcy is initiated by filing a complaint.The failure to comply with a court order, provide requested tax documents, complete a course on personal financial management, transfer or conceal property with the intent to impede, delay, or defraud creditors, destroy or conceal books or records, commit perjury or other fraudulent acts, fail to account for the loss of assets, or violate a court order are all instances where the court may refuse to grant a chapter 7 discharge.

If the debtor’s claim to a discharge is contested at trial, the burden of proof rests with the party objecting to the discharge.

The debtor frequently qualifies for a discharge in chapter 12 and chapter 13 cases after making all required payments under the plan. But just like in chapter 7, if the debtor doesn’t finish a mandatory course in personal financial management, discharge might not be possible in chapter 13. 

A debtor who received a prior discharge in another case that was initiated within the time limitations indicated in the next paragraph is also ineligible for a discharge under chapter 13.

In contrast to chapter 7, creditors of a debtor under chapter 12 or 13 do not have the legal right to contest their discharge. If the debtor has finished making plan payments, creditors may object to the confirmation of the repayment plan, but they cannot object to the discharge.

Your Possessions and the Effects of Discharge

Even if your possessions haven’t been sold yet, a bankruptcy discharge doesn’t imply you’ll get any of them back. The official receiver may need some time to respond to them.

After being discharged, if you acquire any additional assets, they will typically remain your property and cannot be taken by the trustee. Any compensation you receive for payment protection insurance (PPI) that was mis-sold prior to your filing for bankruptcy is a significant exception to this rule.

The Effects of Discharge on Your Home

The residence will not be impacted by your discharge because the official receiver has three years to take action in regard to it. If they don’t take any of the following actions within three years of the date your bankruptcy order was issued, your portion of your home will revert to your ownership:

If you sold your share to someone, such as a partner, friend, or family member, asked the court for an order requiring you and anybody else residing in your home to vacate, and then agreed to pay that person the share’s worth.