Tuesday, July 6, 2010

What exactly does a chapter 7 bankruptcy discharge do?

A discharge releases you from personal liability for discharged debts and prevents the creditors owed those debts from taking any action against you or your property to collect the debts.

As a general rule, excluding cases which are dismissed or converted, individuals receive a discharge in more than 99 percent of chapter 7 cases.

In most cases, unless a complaint has been filed objecting to the discharge or you filed a written waiver, the discharge will be granted relatively early in the case, that is, 60 to 90 days after the date first set for the meeting of creditors. Bankruptcy Rule 4004(c).

The grounds for denying you a discharge are very narrow and are construed against a creditor or trustee seeking to deny you a chapter 7 discharge. Among the grounds for denying a discharge are:

You failed to keep or produce adequate books or financial records;
You failed to explain satisfactorily any loss of assets;
You committed a bankruptcy crime such as perjury;
You failed to obey a lawful order of the bankruptcy court; or
You fraudulently transferred, concealed, or destroyed property that would have become property of the estate. 11 U.S.C. § 727; Bankruptcy Rule 4005.

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