What Does a Bankruptcy Discharge Do?

A bankruptcy discharge is an order from the bankruptcy court that says you’re no longer responsible for paying certain debts. The court enters discharges in both Chapter 7 and Chapter 13 cases. To get a discharge, you must successfully complete all the requirements for your bankruptcy case. In a Chapter 13 case, this usually means completing all your plan payments. Once the court has entered your discharge order, creditors and debt collectors aren’t allowed to try to make you pay the discharged debts.

Not every debt is eligible to be discharged (wiped out by the discharge order). Whether a debt can be discharged depends on the type of debt, the type of bankruptcy you file, and other factors. This article covers which debts can and can’t be discharged in Chapter 7 and Chapter 13, how long it takes to get a bankruptcy discharge, and what happens after discharge.

Discharge and Debt Types

It’s helpful to review some terms before we get started:

• A bankruptcy discharge is a court order that wipes out all eligible debts.

• Dischargeable debt is debt that’s eligible to be wiped out if your bankruptcy case is successful.

• Non-dischargeable debt is debt that won’t be wiped out even if you get a discharge order. This is debt you’ll still have to pay after your bankruptcy case.

• Unsecured debt is debt that’s not backed by property. You may hear this described as debt that’s not “secured by collateral.” Secured debt is debt that’s backed by property. In other words, it’s debt that’s secured by collateral.

It’s important to know whether your debt is dischargeable or non-dischargeable so you can evaluate how much bankruptcy will help to reduce or eliminate your debt load. Some filers have some debt that’s dischargeable and some that’s not. Others have only dischargeable debt, which means they can start with a clean financial slate after bankruptcy.

Now that you have some of the lingo down, let’s get into specifics.

What Debts Can Be Discharged in Chapter 7?

Not all debt can be discharged in Chapter 7 bankruptcy. Generally speaking, Chapter 7 can wipe out most unsecured debts. (There are some exceptions, which we’ll cover later.) The following are some common types of unsecured debt that can usually be eliminated in Chapter 7:

• Credit cards

• Medical bills

• Payday loans

• Personal loans

• Other unsecured loans

• Unpaid rent

• Past-due utility bills 

• Federal student loan debt

Many people believe you can't get rid of student loan debt in bankruptcy but in some cases you can, and the process to discharge federal student loan debt has actually gotten easier as of late 2022. You do have to take the extra step of filing an adversary proceeding and filing out paperwork to prove that repaying your loans is causing undue hardship. The adversarial proceeding process for private student loans is more complicated than for federal loans and often requires the help of a lawyer.

Most secured debts can also be discharged in Chapter 7, but “discharge” means something a little different for secured debts. If you want to give up the collateral, then the Chapter 7 discharge wipes out secured debts just like it does unsecured debts. But if you want to keep the collateral, you usually must pay the debt, even after a Chapter 7 discharge. 

What Debts Can’t Be Discharged in Chapter 7?

Some debts can’t be discharged in Chapter 7, including:

• Debts (secured or unsecured) related to misconduct: If a debt results from fraud, dishonesty, or malice, it may be non-dischargeable. For instance, debt that was incurred from an account that was opened fraudulently. Also, debts related to causing intentional personal injury to another person or their property — including injuring or killing someone while driving under the influence — generally aren’t dischargeable. 

• Certain types of unsecured debts: Some types of unsecured debts are specifically listed as non-dischargeable in the U.S. Bankruptcy Code. 

• Secured debts that you reaffirm: If you have debt that’s secured by collateral, such as a car loan, your lender may ask you to sign a reaffirmation agreement. If you reaffirm a debt, it can’t be discharged.

Non-Dischargeable Unsecured Debts

There are some types of unsecured debts that the Bankruptcy Code specifically says can’t be discharged in Chapter 7 bankruptcy. Some of these include:

• Domestic support obligations: You’ve probably heard that child support isn’t dischargeable in bankruptcy. Other types of domestic support, such as alimony or spousal maintenance, are also non-dischargeable. 

• Certain types of tax debt: Some tax debt is dischargeable in bankruptcy, but most isn’t. Specifically, recent tax debt usually isn’t dischargeable. Tax debt may also be non-dischargeable for other reasons, like if fraud was involved or if you didn’t file your taxes. 

Secured Debt

Car loans and mortgages are the two most common types of secured debt in bankruptcy cases. When you take out secured debt like a car or home loan, the lender has a “security interest” in the collateral. This gives them the right to repossess the collateral, sell it, and keep the funds to pay the debt.

The lender’s security interest isn’t wiped out by a Chapter 7 discharge — if you want to keep the collateral, you must keep paying the debt, even if you file bankruptcy. The Chapter 7 discharge does eliminate your obligation to pay a debt if you don’t keep the collateral, though. If you were to fall behind on your car payments after your bankruptcy is discharged, for instance, the creditor can repossess the car, but the discharge order prevents them from collecting any deficiency balance from you.

The exception is if you sign a reaffirmation agreement with your lender to reaffirm a secured debt. If you reaffirm a debt, that debt is excluded from your discharge. Reaffirmed debts are treated as if you never filed bankruptcy at all. Some creditors require you to reaffirm the debt if you want to keep the collateral.

If you voluntarily surrender property that’s tied to a secured loan, you can usually have the remaining debt discharged. For example, if you owe a lot of money on your car loan and can’t afford to pay it, you can give the car back to the lender and have any remaining debt obligation discharged as part of your Chapter 7 case.

Chapter 7 vs. Chapter 13 Discharges

As we mentioned before, you can get a discharge order in both Chapter 7 and Chapter 13 cases. Discharge works differently in each chapter. Chapter 7 cases tend to move quickly. Filers can get a discharge in as few as 4-6 months. But Chapter 13 takes longer because filers must complete a 3-5 year repayment plan. 

The Chapter 7 discharge wipes out dischargeable debt in full. The Chapter 13 discharge also wipes out dischargeable debt, but only after you’ve completed a court-ordered repayment plan. As part of this plan, you’ll typically have to pay your secured debts (if you’re keeping the collateral) and your priority debts. If you have enough disposable income, you’ll also have to pay a portion of your unsecured non-priority debt. If you successfully complete the plan, the discharge order will wipe out any remaining dischargeable debt. 

Debts Dischargeable in Chapter 13

Most of the debts that can’t be discharged in a Chapter 7 bankruptcy also can’t be discharged in Chapter 13. But there are some exceptions. 

Here are some examples of debt that’s not dischargeable in Chapter 7 but may be in Chapter 13:

• Debts incurred to pay a non-dischargeable tax debt

• Some divorce-related debt (though still not alimony or child support)

• Debt from intentional damage to property 

Unfortunately, federal student loan debt is also non-dischargeable in a Chapter 13 case unless you qualify for a hardship discharge. But Chapter 13 can sometimes be helpful to manage student loan debt. That is, it can reduce your student loan payments for the three or five years your repayment plan lasts. 

Be careful, though. Federal student loan debt doesn’t go away, and you’ll still be responsible for the unpaid balance (plus all interest that accrued while your case was pending) when your Chapter 13 case ends.

How Long Does It Take To Get a Discharge?

Because Chapter 7 and Chapter 13 bankruptcy work very differently, the time frame to get a bankruptcy discharge depends on which type of bankruptcy you file. 

• In a Chapter 7 case, the bankruptcy discharge is typically granted within a matter of months.  

• In a Chapter 13 case, you aren’t eligible for a discharge until you complete your repayment plan. That’s usually either three or five years after you file your case.

Chapter 7 Bankruptcy Discharge Timeline

If everything goes smoothly, you can usually expect to receive your bankruptcy discharge letter about two months after you meet with your trustee at the meeting of creditors. This takes place about a month after you file bankruptcy. The timeline from filing your bankruptcy petition to getting your discharge order can be less than five months, but the exact timing depends on your particular bankruptcy case. 

What can delay a Chapter 7 discharge?

Your creditors have time to object to your bankruptcy discharge. If a creditor files an objection or some other type of adversary proceeding, your bankruptcy case will be delayed while those issues are resolved. 

If the bankruptcy trustee asks you for additional information at or after the 341 meeting, you’ll want to respond quickly. Your bankruptcy case won’t advance until you’ve provided what the trustee requested. You must also complete your personal financial management course before you can receive your discharge. If you delay taking the course, it’ll hold up your discharge.

Fortunately, most of these situations are pretty unusual in Chapter 7 cases. If you do your part, you can usually expect your bankruptcy discharge within six months of filing.

Chapter 13 Bankruptcy Discharge Timeline

In a Chapter 13 bankruptcy case, debts are only discharged after all plan payments have been made. That means that unless a crisis occurs and a judge grants a hardship discharge, you won’t receive your bankruptcy discharge for at least three years after filing for Chapter 13 bankruptcy. 

Don’t worry, though. In a Chapter 13 case, the automatic stay protects you for the duration of your payment plan. So even though you won’t receive a discharge for 3-5 years (or more), creditors can’t hound you for debt payments while your case is active.

As in a Chapter 7 case, you must complete the required debtor education course to be eligible for discharge. 

What Happens After a Bankruptcy Discharge?

When the court enters your discharge order, you should receive a copy in the mail. You may need your discharge order later, so keep it in a safe place. If you don’t receive a copy of your bankruptcy discharge or it’s lost or destroyed, you can get a copy from the bankruptcy court clerk. You can also access a copy through the court’s electronic records system known as PACER. 

If a creditor or debt collector contacts you or sends a bill after you receive a discharge, send them a copy of your discharge order. If they continue to try to collect from you after receiving your discharge order, they’re disobeying a court order. If the problem continues, your bankruptcy case can be reopened so the court can decide whether and how to punish the debt collector.

After you get your discharge, take advantage of the opportunity to build a stronger financial foundation and repair your credit. That’s what the fresh start is for! That means managing your finances carefully and monitoring your credit report. 

Let’s Summarize…

A bankruptcy discharge is an important court order that eliminates your eligible debts. Only some debts can be eliminated through bankruptcy, including most unsecured debts like credit card debt or medical bills. If you have debts secured by collateral, the Chapter 7 discharge will only wipe those debts out if you give up the collateral. If you want to keep it, you have to keep paying the debt after the discharge. 

For a bankruptcy discharge, the type of debt you have matters and so does the type of bankruptcy you decide to file. If you file Chapter 7, your dischargeable debts will be eliminated in a matter of months. If you file Chapter 13, you have to complete your 3-5 year payment plan before your dischargeable debts are eliminated.