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An Understanding of Chapter 7 Bankruptcy Discharge

A discharge releases individual debtors from personal liability for almost all debts and stops the creditors owed those debts from taking any collection decisions against the debtor. Because a chapter 7 discharge is subject to a large number of conditions, debtors should take advice from skilled lawyer just before filing to discuss the range of the discharge. Mostly, excluding cases that are ignored or converted, individual debtors attain a discharge in greater than 99 percent of chapter 7 cases. In the vast majority of cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case ñ generally, 60 to 90 days following the date first set for the conference of creditors. Fed. R. Bankr. P. 4004(c).

The reasons for denying an individual debtor a discharge in a chapter 7 case are small and are construedagainst the moving party. Among other causes, the court may deny the debtor a discharge if it confirms that the debtor: was not able to keep or produce satisfactory books or financial records; failed to explain satisfactorily any loss of property; committed a bankruptcy criminal offence such as perjury; failed to obey a lawful order of the bankruptcy court; fraudulently transferred, obscured, or demolished property that would have become property of the estate; or failed to complete an approved instructional course concerning financial management. 11 U.S.C. - 727; Fed. R. Bankr. P. 4005.

Secured creditors may retain some rights to grab real estate property securing an underlying debt even after a discharge is granted. Dependent on varying circumstances, if a debtor likes to keep specific secured property (such as an automobile), he or she may choose to “reaffirm” the debt. A reaffirmation is a settlement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy. In exchange, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor goes on to pay the debt.

If the debtor makes a decision to reaffirm a debt, he or she must do so ahead of the discharge is entered. The debtor must sign a written reaffirmation agreement and file it with the court. 11 U.S.C. - 524(c). The Bankruptcy Code requires that reaffirmation agreements have an extensive set of disclosures described in 11 U.S.C. - 524(k). Amongst other things, the disclosures must guide the debtor of the amount of the debt being reaffirmed and how it is determined and that reaffirmation means that the debtor’s personal liability for that debt will not be discharged in the bankruptcy. The disclosures also require the debtor to sign and file a statement of his or her current income and expenses which shows that the balance of income paying expenses is sufficient to pay the reaffirmed debt. If the balance is not enough to pay the debt to be reaffirmed, there is a presumption of undue hardship, and the court may decide not to approve the reaffirmation agreement. Unless the debtor is represented by an attorney, the bankruptcy judge must approve the reaffirmation agreement.

If the debtor was represented by  a lawyer in connection with the reaffirmation agreement, the attorney must approve in writing that he or she advised the debtor of the legal effect and final outcomes of the agreement, which includes a default under the agreement. The attorney must also approve that the debtor was fully informed and voluntarily made the agreement and that reaffirmation of the debt will not create an undue hardship for the debtor or the debtor’s dependents. 11 U.S.C. - 524(k). The Bankruptcy Code requires a reaffirmation hearing if the debtor has not been represented by an attorney during the negotiating of the agreement, or if the court disapproves the reaffirmation agreement. 11 U.S.C. - 524(d) and (m). The debtor may repay any debt voluntarily, however, whether or not a reaffirmation agreement exists. 11 U.S.C. - 524(f).

An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. A creditor may no longer set off or keep up any legal or other action against the debtor to collect a discharged debt. But not all of an individual’s debts are discharged in chapter 7. Debts not discharged contain debts for alimony and child support, certain taxes, debts for certain educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury by the debtor to another entity or to the property of another entity, debts for death or personal injury caused by the debtor’s operation of an automobile while the debtor was intoxicated from alcohol or other substances, and debts for selected criminal restitution orders. 11 U.S.C. - 523(a). The debtor will continue to be liable for these types of debts to the extent that they are not paid in the chapter 7 case. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared non-dischargeable. 11 U.S.C. - 523(c); Fed. R. Bankr. P. 4007(c).

For help with an Augusta GA chapter 7 bankruptcy, call a bankruptcy lawyer Augusta GA. An Augusta Georgia bankruptcy law firm could give you the help you need.