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What Is A Chapter 7 Discharge?

A chapter 7 discharge is a permanent injunction against any creditors trying to collect the debt from the person. It does not mean they do not owe the debt anymore, it just means that none of their creditors can try to force them to pay their debt. The person would still be able to pay any debts they wanted to, so they could certainly repay money they had borrowed from friends and family, because there would be nothing that would prohibit them from repaying the money. But creditors would be prohibited from trying to force the person to pay the money.

Any debts that are discharged during the bankruptcy have to be reported as zero balances on a credit report. They can report the debt on the account because as a legal matter, the person still owes the money but they are just not allowed to try to collect it from the person. The credit report should have all zero balances after filing a bankruptcy, and it could say something like, “Included in a bankruptcy”, or, “Included in chapter 7”, but that is as far as they can go in terms of reporting the debt.

How Does One Obtain A Chapter 7 Discharge?

The number one prohibition is that a person cannot get a Chapter 7 discharge more than once every eight years. There have been a lot of people coming back to file again for the second time because they have been crushed by the recession in the economy. The second thing is that the person has to be qualified in terms of income, because income limitations may apply to the person. These limitations are fairly complex but someone who was making more than a certain amount of money might not be able to file for a chapter 7. Generally, in Maryland, it would be $60,000 for a household of one, and $76,000 for a household of two, and it goes up about $10,000 per person after that.

The other issue would be if the person owned a house but was behind on the payments. They might not want to file a chapter 7 because they were trying to catch up on payments and save their home. So in that case, the chapter 13 would make more sense. However it would be time to do a chapter 7 if someone had a lot of debt, their creditors were harassing them and their credit score was ruined.

How Does Someone Know When The Discharge Has Been Granted Or Accepted?

Generally, the person will find out at the meeting of creditors. At the meeting of creditors, the trustee will ask the person questions under oath about all of their paperwork and assets. At the end of the meeting, if he is satisfied with all of the answers, and no issues come up, then he will probably say that he is going to file a, “No Asset or No Distribution Report”, which just means that he is done with the case and does not think there is anything there for creditors so he can move on to the next case.

There is still the 60-day waiting period after that. Creditors can still file objections to the discharge for a particular debt for up to 60 days after the meeting of creditors, although that is pretty rare.  It probably the one in a 500-1,000 cases where any kind of adversary objection to discharge is filed. In most cases, 95 to 97 percent of the time, the trustee will file a “No Asset Report”, meaning there is nothing there and the person can move forward knowing that they will get their discharge in about 60 days.

What Types Of Debts Are Not Dischargeable In A Chapter 7 Case?

There are really four main categories of debts that cannot be gotten rid of in a bankruptcy. The main debt that is not dischargeable is student loans. A lot of people have borrowed money for student loans to go to college but unfortunately that cannot be wiped out in a chapter 7. The second most common one is child support or alimony which cannot be wiped out either. The third most common debt is taxes to the IRS or the State of Maryland. In some cases, however, it is possible to get rid of the taxes if they were more than three years old and the person had filed all their returns on time; taxes in the bankruptcy that are less than three years old cannot be wiped off. The fourth common is fines owed to the government like parking tickets, red light camera tickets, and MVA fines.

What Should I Do If A Creditor Attempts To Collect A Debt That Was Discharged In My Chapter 7 Case?

The first thing a person should do is keep records of all the times the creditor has contacted them. If the person has caller ID, they can even take a picture of the caller ID with their phone and keep a record of that. If they send a letter, then they need to keep copies of all of that, and immediately notify the bankruptcy attorney that they have been contacted so the creditors can be notified. But if that does not get them to stop, then eventually they can be sued for violating the automatic stay Because once a bankruptcy is filed, they are not supposed to contact the person anymore, so if they keep contacting the person, it would be a violation of the stay.  Sometimes they can be sued and the client can actually get money back from them. The main thing a person should do is to keep good records and let the bankruptcy attorney know that the creditors have been contacting them.

What If Someone Wanted To Repay A Dischargeable Debt, Is That Possible?

Absolutely! A person is allowed to repay anybody they want to after filing a bankruptcy. The idea behind a bankruptcy is to prevent the creditors from ever trying to force the person to pay a debt but he can certainly voluntarily repay anyone. A common one is the Credit Unions because they generally require the person to repay their debts if they want to stay in good standing with them. Sometimes people have been long time members of a Credit Union and they have a small credit card that they want to pay with that particular Credit Union. So they continue to pay that debt to stay in good standing. Obviously, if someone has borrowed money from friends or family, they may want to pay that just to protect their relationship with those people. A person can absolutely repay any debt that they want to after filing a bankruptcy.

How Would A Chapter 7 Discharge Affect The Liability Of Cosigners Who May Be Liable To A Creditor Or A Discharged Debt?

This is a very common issue. Unfortunately, if a chapter 7 is filed for one cosigner, the creditor can still go after the other cosigner for a 100 percent of the amount owed. People sometimes say they are the second signer but it does not matter where the person signed, because they are each 100 percent liable for the debt. If one party files bankruptcy, they can still go after the other party for 100 percent of the debt if there are cosigners in any of the debts. Then they need to make sure they are aware and protected or else they will have to pay the debt. It is fairly common for the husband and wife to split up, but when the husband or wife files a bankruptcy, they can come after the other one. This also happens when parents sign for their children for cars but when the kids do not make the payments; the parents end up taking the fall.

For more information on Chapter 7 Discharge, a free initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (855) 4MD-BANK today.

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