What is a Discharge in Bankruptcy?
The term discharge in bankruptcy law refers to when the debtor is released from liability to pay a debt. The person is then no longer held liable or obligated to pay the discharged debt. Not all debt can be discharged in Hawaii bankruptcy. Federally backed student loans are rarely discharged except in case of complete disability or death of the borrower. Federal taxes are rarely discharged. Child support debt cannot be discharged in bankruptcy. A discharged debt does not mean debtors owe nothing. Debt secured by a lien on the property can be claimed by the lender as payment for the debt. As the bankruptcy proceeds, cars can be reclaimed by the lender as payment for the auto loan, even if there is equity in the vehicle. In many states, the home can be taken as payment for first mortgages, second mortgages and home equity lines of credit.
What is a discharge in bankruptcy? It means that the debtor is forever released from those debts unless they affirm the debts and seek to entire a payment plan negotiated in bankruptcy court to keep the house or cars. If someone completes a Chapter 7 bankruptcy and total liquidation of assets, they can not be pursued for the debts discharged in the bankruptcy. Lenders cannot then pursue the borrower five years later for the debts, even if it is within the statute of limitations.
If someone is suspected of hiding assets from the bankruptcy, lenders may challenge the bankruptcy. If someone forgets to include a debt in the bankruptcy, the debt is not discharged by the Hawaii bankruptcy lawyer. If someone goes into debt after bankruptcy, the individual is liable for the new debt acquired after the bankruptcy. Failure to make payments per the repayment plan in Chapter 11 bankruptcy can cause creditors to revoke the bankruptcy and seek payment from the borrower. Borrowers must be careful when debt collectors call and seek a verbal or written affirmation of a debt discharged in bankruptcy, since this can be used to justify future collection efforts.
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