Discharge of Debts (Bills).

What is a discharge in bankruptcy?

A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.

When does the discharge occur?

The timing of the discharge varies, depending on the chapter under which the case is filed. In a chapter 7 (liquidation) case, for example, the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse (60 days following the first date set for the 341 meeting). Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court. Since a chapter 12 or chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs about four years after the date of filing.

How does the debtor get a discharge?

Unless there is litigation involving objections to the discharge, the debtor will usually automatically receive a discharge. The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the U.S. trustee, the trustee in the case, and the trustee's attorney, if any. The debtor and the debtor's attorney also receive copies of the discharge order. The notice, which is simply a copy of the final order of discharge, is not specific as to those debts determined by the court to be non-dischargeable, i.e., not covered by the discharge. The notice informs creditors generally that the debts owed to them have been discharged and that they should not attempt any further collection. They are cautioned in the notice that continuing collection efforts could subject them to punishment for contempt. Any inadvertent failure on the part of the clerk to send the debtor or any creditor a copy of the discharge order promptly within the time required by the rules does not affect the validity of the order granting the discharge.

Will Bankruptcy Affect My Credit?

There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcies will probably not make things any worse.

The fact that you've filed a bankruptcy can appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.

What Else Should I Know?

- Utility Services - Public Utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills that arise after bankruptcy is filed.

- Discrimination - An employer or government agency cannot discriminate against you because you have filed for bankruptcy.

- Driver's License - If you lost your license solely because you couldn't pay court ordered damages caused in an accident, bankruptcy will allow you to get your license back.

- Co-signers - If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.

What Bankruptcy Can and Cannot Do for You.

What Can Bankruptcy Do for Me?

Bankruptcy may make it possible for you to:

· Eliminate the legal obligation to pay most or all of your debts. This called a "discharge" of debts. It is designed to give you a fresh financial start.

· Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages or other liens on your property without payment.)

· Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.

· Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.

· Restore or prevent termination of utility service.

· Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.

What Bankruptcy Cannot Do.

Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:

· Eliminate certain rights of "secured" creditors. A "secured" creditor has taken a mortgage or other lien on property as collateral for the loan.

Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt.

· Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, and certain other debts related to divorce, some student loans, court restitution orders, criminal fines and some taxes.

· Protect cosigners on your debts. When a relative or friend has cosigned a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.

· Discharge debts that arise after bankruptcy has been filed.

Can I File a Chapter 7 By Myself, Without an Attorney?

You certainly have the right to file a Chapter 7 case by yourself. The forms are available either on-line or at an office supply store. There are also several books about how to do this.

Here are the problems:

1. Bankruptcy has become significantly more complicated since October 2005, when the BAPCPA changes to the bankruptcy laws were enacted. Many lawyers who used to file the occasional Chapter 7 have given up the practice because of the complications. Particularly, you need to fully understand how the means test works. If you do the calculations incorrectly, you could end up in a deposition at the United States' trustee's office, face a motion to dismiss, or face a motion to convert to Chapter 13.

2. You need to understand about the pre-filing credit counseling requirement as well as the pre-discharge financial management course requirement

3. In order to actually file your case, you will need to have your petition and schedules scanned into PDF format for filing with the Bankruptcy Clerk. You can do this at the Bankruptcy Court and I believe that this process is not particularly complicated, but I have not done it since I file electronically from my office.

4. You may not be able to dismiss a Chapter 7 voluntarily if you change your mind. For example, if you file, but it turns out that you earn too much or own too many assets the judge may not let you out of your case, at least until after your assets are liquidated.

5. You need to understand how the bankruptcy exemption law works and how it applies in Chapter 7 to protect property that the law allows you to protect. If you don't properly declare property as exempt even if the law would otherwise allow you to protect it, then you could lose your property anyway.

6. You will not receive advice from the Chapter 7 trustees or the U.S. Trustees. Their interest is to maximize the recovery of the estate (i.e. your creditors). They are not your friends.

I do not think it is a good idea to try to file bankruptcy without counsel. I have always been willing to work with Chapter 7 debtors with straightforward cases and not a lot of money.