FAQ - Bankruptcy Discharges

What is the discharge all about?
If I receive a discharge, doesn't that mean I no longer have to pay my mortgage?
Can I discharge a tax debt?
Can I discharge my student loan?

Questions and Answers

What is the discharge all about?

The goal of any bankruptcy case is to receive a discharge. In the context of bankruptcy, the word "discharge" means "the release of a debtor from the obligation to pay a debt." Your discharge is a release of personal obligation. But, as explained in the next item, that doesn't mean you get to keep property that secures a discharged debt without paying for it.

If I receive a discharge, doesn't that mean I no longer have to pay my mortgage (car loan, etc.)?

Emphatically, no! At least - not if you want to keep your house or your car or whatever property secures the debt in question. A discharge is only a release of personal liability - not the liability that attaches to the property. If you want to keep your car or your house (or any secured property) you'll need to continue making payments. That means in Chapter 13 participation of the debt in the payment plan, or in a Chapter 7 that you continue making payments regardless of whether the property is exempt or not.

Can I discharge a tax debt?

The short answer: maybe. It depends on several factors, including how long ago the debt was incurred, the nature of the tax underlying the debt, and other factors. Generally, however, if the tax is unsecured by property or a lien, and it's over 3 years old, and there's no fraud involved, it should be dischargeable in either a Chapter 7 or a Chapter 13.

Can I discharge a student loan?

Again: maybe. However, it's a lot less likely than discharging a tax debt. With student loans, a very strong showing of a significant undue hardship must be made. Successfully making that showing is proving to be very difficult for most debtors as a matter of practice, as reflected in post-BAPCPA case law. However, it is possible.

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