During times of serious financial difficulties, people may wonder how they will ever escape their mounting debts and regain financial stability. Individuals who have trouble paying their bills, making their mortgage payments and supporting their family may not be able to envision a life free from harassing calls from creditors and other financial burdens. People facing dire financial situations may turn to bankruptcy to discharge some of their debts and rebuild their finances.
During bankruptcy proceedings, certain debts may be discharged completely, while others may not be eligible for discharge. Under federal law, a discharge releases individuals from liability for specific debts. This wholesale dismissal differs from payment plans and other resolutions that may be reached with creditors. In the case of discharge, the debtor may not be held liable for any debts owed to creditors and following bankruptcy, the individual may not need to make any payments on the debt.
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Notices of discharge are often mailed to the person's creditors, alerting them of the court order and instructing them to cease attempts to collect the debt. This means that the creditor cannot pursue payment of the debt through phone calls, letters, or personal contact. Discharged debts remove the individual for personal liability for debts, but often do not apply to valid liens, or property that has been promised as collateral for a debt. If a person takes a line of credit in exchange for a lien against his or her property, the creditor can still pursue payment of the debt if they hold a valid lien.
Discharges can be revoked in certain cases, so it is important that the bankruptcy applicant carefully and truthfully complete all parts of the bankruptcy application. If the discharge was obtained in a fraudulent manner, if assets were concealed from the court, or any other disclosures are made that would jeopardize the discharge, the court may order a revocation of the discharge notices and the debtor will once again be held liable for the money owed.
It is important that individuals consult an experienced bankruptcy attorney if they have any questions regarding bankruptcy, debt discharge, and other financial terms that are often associated with bankruptcy proceedings. Bankruptcy applications can be confusing for individuals unfamiliar with the process, and it is important to complete the application in a careful and thorough manner.
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