I Got My Chapter 7 Discharge! Now What?

What Is a Bankruptcy Discharge?

A bankruptcy discharge is a court order that legally wipes out your obligation to pay certain debts. Once a debt is discharged, creditors are permanently prohibited from trying to collect it. This means no more phone calls, letters, lawsuits, or any other collection activity related to that debt. The discharge is essentially the finish line for most people who file for bankruptcy. It’s the primary goal of both Chapter 7 and Chapter 13 bankruptcy cases.

In this article, we’ll break down how a bankruptcy discharge works, which debts can and can’t be discharged, and how to make the most of your financial fresh start after your discharge is granted.

How Is a Bankruptcy Discharge Different From the Automatic Stay?

The automatic stay and a bankruptcy discharge are both powerful protections, but they serve different purposes and happen at different stages of the bankruptcy process.

The automatic stay is a temporary court order that takes effect as soon as you file your bankruptcy case. It stops creditors from contacting you, taking legal action against you, garnishing your wages, or pursuing other collection efforts while your case is active. However, the stay is not permanent. It only lasts until your bankruptcy case is completed or dismissed.

A bankruptcy discharge, on the other hand, is permanent. It’s the court order you receive at the end of a successful bankruptcy case, and it eliminates your legal obligation to repay most debts. Once you receive your discharge, creditors are permanently barred from trying to collect those debts.

In short, the automatic stay protects you during your bankruptcy case, while the discharge provides lasting relief after your case is successfully completed.

How Does the Bankruptcy Discharge Work?

At the end of a successful bankruptcy case, the court issues a discharge order. This order eliminates your legal obligation to pay most debts that were included in the bankruptcy. This usually includes credit card debt, medical bills, past-due utility bills, personal loans, and sometimes student loans.

The discharge also stops creditors from contacting you or trying to collect these debts in the future. Essentially, a discharge provides the long-term financial relief that makes bankruptcy a powerful tool for a fresh start.

Discharge orders are usually permanent, but in rare circumstances they can be revoked. For example, if the court discovers you lied on your bankruptcy paperwork, hid assets, or committed fraud, the discharge may be undone. 

How Does a Discharge Work in Chapter 7 Bankruptcy?

In Chapter 7 bankruptcy, a discharge is usually granted within a few months of filing your petition. This type of discharge eliminates most unsecured debts, like credit card balances, personal loans, and medical bills. Once the court issues the discharge order, these debts are wiped out for good, and creditors can no longer contact you or demand payment.

To get a discharge in a Chapter 7 case, you have to pass the means test and complete all steps in the bankruptcy process. This includes attending the meeting of creditors and submitting required documents to your trustee. It could also include handing over any non-exempt property to the trustee, which they can use to pay your creditors. But most people who file for Chapter 7 don’t lose anything. That’s because most cases are “no-asset cases,” meaning filers get to keep all their property.

How Does a Discharge Work in Chapter 13 Bankruptcy?

In Chapter 13 bankruptcy, the discharge happens after you successfully complete a 3–5-year repayment plan. Unlike Chapter 7, Chapter 13 requires you to pay back some or all of your debts through a court-approved plan. Once the plan is completed, the remaining eligible debts are discharged.

Sometimes referred to as a “super discharge,” Chapter 13 offers broader discharge protections than Chapter 7. Certain debts that can’t be eliminated in Chapter 7, such as debts from property settlements in divorce, may be discharged in Chapter 13 bankruptcy proceedings. However, obligations like child support, alimony, and private student loans remain non-dischargeable in both types of bankruptcy.

Who Is Eligible for a Bankruptcy Discharge?

To receive a bankruptcy discharge, you need to meet certain eligibility requirements, which vary depending on the type of bankruptcy you file. For Chapter 7, this means passing the means test, which evaluates your income and expenses. Additionally, prior bankruptcy filings can affect your eligibility, as there are specific waiting periods between discharges.

Chapter 7 Eligibility — The Means Test

To qualify for a Chapter 7 bankruptcy discharge, you must pass the means test, which determines whether your income is low enough to justify erasing your debts through Chapter 7. The test compares your household income to the median income for a household of your size in your state.

• If your income is below the median, you automatically pass the means test and qualify for Chapter 7.

• If your income is above the median, you’ll need to complete a more detailed analysis of your income and allowable expenses to see if you still qualify.

The goal of the means test is to ensure that Chapter 7 is reserved for people who truly can’t afford to repay their debts. If you don’t qualify, you may still be eligible for Chapter 13 bankruptcy, where you’ll pay back a portion of your debts through a repayment plan.

How Prior Bankruptcy Filings Affect Eligibility

Bankruptcy law sets time limits on how often you can receive a discharge to prevent abuse of the system. The waiting period depends on whether your prior discharge was for a Chapter 7 or Chapter 13 case:

• If your previous case was Chapter 7: You must wait eight years from the date of filing your last Chapter 7 case to be eligible for another Chapter 7 discharge.

• If your previous case was Chapter 13: You must wait six years from the filing date of your Chapter 13 case to receive a Chapter 7 discharge.

There’s no lifetime cap on how many times you can file for bankruptcy, but these time limits make it harder to erase debts repeatedly within short time frames. 

What Debts CAN Be Discharged in Bankruptcy?

A bankruptcy discharge eliminates many types of debts, but not all debts can be erased.

Most unsecured debts — debts that aren’t backed by collateral — can be discharged in bankruptcy. These include:

• Credit card debt

• Medical bills

• Personal loans

• Utility bills

• Certain types of old tax debts

What Debts CAN’T Be Discharged in Bankruptcy?

Some debts are considered non-dischargeable, meaning they can’t be erased through bankruptcy. The most common examples include:

• Recent tax debts: Taxes from the last few years are usually not dischargeable.

• Child support and alimony: These obligations must continue to be paid.

• Court fines and criminal restitution: Debts related to criminal activity, such as fines or restitution orders, can’t be discharged.

• Debts from fraud: If you incurred debts by committing fraud, such as lying on a credit application or running up credit card debt with no intent to repay, those debts can’t be discharged.

Federal student loans can be discharged if you can provide proof that repaying them is causing undue financial hardship. You’ll have to submit additional paperwork to get your student loans discharged.

Life After Your Bankruptcy Discharge

Once the court grants your bankruptcy discharge, your qualifying debts are erased, giving you a fresh financial start. In most no-asset Chapter 7 cases, the bankruptcy court will close your case shortly after the discharge. However, if the trustee needs to sell property or resolve legal matters, the process may take longer.

For most filers, the discharge is the final step in their bankruptcy journey. After the trustee submits a “Final Report,” the court issues a final decree, officially closing the case. Now, it’s time to focus on rebuilding your financial future.

Short-Term Steps: Getting Organized and Staying on Track

Right after receiving your bankruptcy discharge, take a few key steps to set yourself up for financial success:

• Keep copies of your bankruptcy documents: Store all important paperwork in a safe place, including your bankruptcy petition, schedules, course completion certificates, any amendments, and your discharge letter. These may be useful if a creditor mistakenly tries to collect a discharged debt or if you apply for new credit in the future.

• Check your credit report: Make sure discharged debts show a zero balance and that all information is accurate. You can get a free credit report from each of the three major credit bureaus once per year at AnnualCreditReport.com. You can dispute errors you find to ensure your report reflects your fresh financial start.

• Create a budget: Base your budget on your current income and regular expenses. Your credit counseling course may have provided helpful tips, or you can use Schedules I and J from your bankruptcy paperwork as a starting point.

• Build an emergency fund: Set aside money regularly for unexpected expenses. Even small contributions add up and can help prevent future financial struggles.

Long-Term Steps: Strengthening Your Financial Future

Once you’ve handled the immediate post-bankruptcy tasks, focus on long-term strategies to rebuild financial stability.

• Plan for remaining debts: If you still owe non-dischargeable debts like child support, alimony, or certain taxes, create a plan to stay current. With your unsecured debt behind you, you may be able to pay off these obligations faster.

• Rebuild your credit: Responsible credit use can help improve your score over time. Consider starting with a secured credit card, which requires a cash deposit as collateral. Use it for small purchases and pay it off in full each month to establish a positive credit history without accumulating new debt.

• Leverage your existing payment history: Some financial actions you're already taking may help rebuild your credit. If you’ve continued making rent or car loan payments, those consistent payments can demonstrate responsible financial behavior.

By staying organized, sticking to a budget, and making smart credit decisions, you can take full advantage of your fresh start and build a stronger financial future.

Let’s Summarize…

Receiving a bankruptcy discharge is the main goal in filing for bankruptcy. Your discharge order erases your debts and makes sure your creditors can never attempt collection activity against you again for those discharged debts. Bankruptcy gives filers the financial fresh start that they need.

If you’re hoping to file Chapter 7 bankruptcy to get your debts discharged, you can see if you’re eligible to use Upsolve’s free filing tool. If you have a complicated case, it’s a good idea to get personalized legal advice from a professional bankruptcy attorney. Upsolve can help you set up a free consultation with a lawyer near you.