Clearly people file a Chapter 7 bankruptcy with the goal to wipe out their debts. Not so obviously though, not all debts can be discharged. Bankruptcy places debts into three categories. They are; secured debts, unsecured, priority debts, and unsecured, non-priority debts. So only the unsecured, non-priority debts are discharged.
Homes and cars//boats/planes/trains, et cetera, these are generally owned by the debtor but he is still making monthly payments to the bank. For such debts the debtor can only elect whether to keep the item and continue to make monthly payments on them, or return the item to the bank.
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The second category above is for things such as back taxes, student loans, unpaid spousal support or child support. There is an exception for taxes and student loans to be discharged. There is no exception to having unpaid spousal support or child support discharged.
It is the last category of debts that can be discharged. But...there are a couple exceptions to this rule as well. Before I tell you what those exceptions are, I will give examples of this type of debt. This type of debt is for things such as credit cards, unpaid utilities for a home or apartment that you no longer live in, medical bills, cash advances, unpaid back taxes if certain conditions are met, and any deficiency balance for a repossessed car or a foreclosed upon home. Plus ---- you can even list potential debts of an unknown amount!
When the debtor receives the Order of Discharge from the bankruptcy case, that Order refers to this last category of debts. These debts are listed on the form called Schedule F.
If the debtor failed to list a given debt on the Schedule F, then that debt is not discharged. The other exception referenced above is for debts on Schedule F which are incorrectly placed there. For example, if the debtor listed student loans on his Schedule F, and he received an Order of Discharge, that discharge does not affect the student loans. Why? Because the student loans have to be listed on Schedule E. It is not necessary for the student loan company to have to raise a finger in this case. The debt is simply still alive.
Let's say that the debtor received his Order of Discharge. The case is done and closed. However, the debtor failed to list one or more creditors on his Schedule F. The debtor can re-open the case to list those creditors. Generally, all that is required is for the debtor to re-open the case, file the paperwork and send copies to the affected creditors, and possibly attend another Meeting of Creditors. There may be other rules and procedures to follow, so it is best to consult with a bankruptcy attorney beforehand.
In the situation above, almost always a new Order of Discharge is granted and then the case is closed. And, this re-opening is not considered to be a new case, so there is no time for the debtor to wait before taking action. The debtor will be debt free as a result of filing a Chapter 7 bankruptcy case.
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