The Bankruptcy Discharge.

60-Day Waiting Period. After the Creditors Meeting, there is a 60-day period during which time creditors can file claims if they believe you have non-exempt assets and during which creditors may object to being discharged provided they have legal grounds. Grounds for objection to discharge include the fraud, student loans, alimony and support obligations etc.
Discharge Order. A minimum of 60 days (usually more) following the creditors meeting you should receive a copy of a court order that discharges your debts. The discharge order wipes out your debts and liability to creditors in your bankruptcy. Do not expect to receive your discharge immediately after 60 days. You can call the Bankruptcy Voice Case Information System at (866) 879-1286 for an update on your case.

Discharged Debts. The entry of a discharge order does not affect a secured creditor’s rights in property which you pledged to repay the secured creditor. The secured creditor can always repossess the secured property if you do not pay according to your loan agreement. In addition, the discharge order only discharges debts that “are dischargeable.” Therefore, the order does not eliminate non-dischargeable debts, such as student loans, ineligible tax liability, or loans procured by fraud or by abuse of the bankruptcy system. The Order of Discharge does not give you a list of specific debts that were discharged; it simply states that dischargeable debts are discharged. What debts are not Discharged?

The Bankruptcy Code has a list of debts which cannot be discharged in Chapter 7 bankruptcy. These non-dischargeable debts include:

  • Debts incurred through fraud or embezzlement;
  • Recent income tax liability;
  • Education loans / student loans;
  • Fines and penalties payable to the government;
  • Child support, alimony, and property settlement obligations;
  • Debts incurred for the purchase of luxury goods.

A new Section 522(q)(1) of the Code provides that a debtor may not exempt more than $125,000 of homestead equity regardless of when he acquired the homestead if the debtors owes a debt on account of a criminal act, an intentional tort, reckless misconduct or a civil remedy under RICO laws. Civil fraud, often alleged in civil complaints, falls within the category of intentional tort.

If a creditor files a claim which alleges a debt arising out of the these above categories the debtor would have to object to the claim and defend the allegation in a separate bankruptcy adversary proceeding in order to protect homestead equity above $125,000. If the debtor owned a homestead jointly with a spouse the protected equity would probably rise to $250,000. Creditors could gain leverage against bankruptcy debtors by basing claims on the wrongs listed in Section 522(q)(1).

There is a presumption of non-dischargeability for cash advances of over $750 taken within seventy (70) days of filing and for purchase of more than $500 within ninety (90) days of filing.

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