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How does a debtor obtain a discharge of debts in a bankruptcy?

Pennsylvania residents who are faced with overwhelming consumer or medical debt may sometimes consider filing for bankruptcy as a method of obtaining some relief from these obligations. The ultimate goal is to obtain a discharge from the bankruptcy court, as the effect of a discharge releases the filer from personal liability from some of these debts. The affected creditors are also prohibited from further communications with the debtor and from instituting or continuing any form of collection activity with respect to those obligations.

Not all debts are eligible for discharge, and the timing depends upon the type of bankruptcy that is filed. In addition, a discharge does not eliminate some valid liens, and thus the secured creditor may still be free to enforce the lien in order to reclaim the property. In a Chapter 7 bankruptcy, most unsecured indebtedness that remains after the debtor's non-exempt property has been liquidated and the proceeds applied towards creditors will be discharged. Exceptions include certain types of tax liabilities, outstanding child or spousal support, personal injury awards payable as a result of the debtor operating a motor vehicle while impaired, and most government student loans. The scope of dischargeable debts under a Chapter 13 bankruptcy is somewhat broader.

The timing of a discharge in a Chapter 7 bankruptcy is usually about four months after the initial filing. In a Chapter 13 bankruptcy, the discharge is normally issued upon the satisfactory completion by the debtor of all payments mandated by the court-approved repayment plan, generally between three and five years after the date of filing.

As each debtor's set of circumstances is different, the foregoing should not be construed as legal advice. An attorney who has experience in bankruptcy law can explain in more detail which of a particular client's debts may be subject to discharge as well as describing the eligibility requirements of both Chapter 7 and Chapter 13.

Source: USCourts.gov, "Discharge in Bankruptcy", Federal Bankruptcy Court - Pennsylvania, September 24, 2014

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