An issue that frequently confuses clients is what debts are actually discharged in bankruptcy. This issue arises because all debts or liabilities a client has must be schedules on the Debtors’ petition. Approximately 3 months after filing bankruptcy the Debtor will receive a document stating that a discharge has been granted. The fact that the discharge was granted does not mean that every debt listed on the petition was discharged. Some debts such as child support, criminal restitution, fines, and certain tax liabilities are never among the debts discharged in bankruptcy.

Some debts such as income taxes may be discharged depending on whether they meet the criteria for dischargability. For example a priority tax liability which became due within 3 years of filing the petition will not be discharged. A tax liability that became due more than 3 years prior to filing bankruptcy may be dischargeable depending on various other factors such as when it was filed and whether or not the taxpayer or Irs filed the return. Other factors may also influence the dischargablity of tax liabilities that are more than 3 years old, such as fraud.

Creditors' Objections to Debts Discharged in Bankruptcy

Another consideration is that a creditor may object to its debt being discharged based on fraud or some other similar action. In that case the creditor must formally object to the debt being discharged by filing an adversary proceeding. Failing to object will bar the creditor from pursuing the debt once they case is discharged.

Choosing the Right Bankruptcy Chapter to Discharge Certain Debts

An important consideration in filing bankruptcy is choosing the right Chapter to file. Chapter 13 offers a client a broader discharge than under Ch 7. Property settlements in divorce and certain government penalties may be discharged in Chapter 13 and not Chapter 7. It is important to review these issues with an experienced bankruptcy attorney to obtain the best relief for the client