A bankruptcy discharge spells the end of the bankruptcy process because it means that the creditor can no longer pursue, attempt to collect, or otherwise harass the individual who has filed for bankruptcy.
But how does one obtain a bankruptcy discharge? And sometimes an individual may be confronted with something which is called bankruptcy suspense, what is this and how does it work? Furthermore, what happens after the bankruptcy discharge process has ended? Let's take a look in detail.
How to File for Bankruptcy
- Firstly, it’s necessary to decide on what type of bankruptcy is best. For some, Chapter 7 bankruptcy is best because the business or individual is unable to pay back their debts, whereas for others a debt restructuring program under Chapter 13 bankruptcy would be more prudent.
- Gather a list of the creditors where money is owed and the amount which is owed to these creditors.
- Compile a list of the personal or company assets. Never try and transfer or disguise the assets as this can easily be caught further down the line.
- Compile all recent banking statements, tax returns, and pay stubs.
- Complete a credit counseling session and obtain the completion certificate or the bankruptcy court will refuse to allow any applications to file for bankruptcy.
- Use an experienced lawyer to file all the necessary forms to the court, it’s highly-recommended that this isn’t attempted without a lawyer because the case can easily be thrown out if any form is filled out incorrectly.
- Attend the 341 meeting, which is otherwise known as the meeting of creditors. This meeting will usually only last between ten and thirty minutes at the most.
- If all goes well then the bankruptcy discharge will then be received.
What is Bankruptcy Suspense?
Some people often become confused as the bankruptcy discharge and the bankruptcy suspense both share some of the same effects. Both the bankruptcy discharge and the bankruptcy suspense make it legally impossible for any creditor to attempt to claim any money either through foreclosure, repossession, or in any other manner at all.
But the bankruptcy suspense comes into play when the application to file for bankruptcy is initially accepted by the court. When this application is accepted the creditors can no longer pursue any outstanding debts while the bankruptcy process is still ongoing. On the other hand, the bankruptcy discharge is final. If a discharge is given then that means the debt no longer applies to the individual or business any longer, and the creditor can no longer pursue that debt.
What Happens After Discharge?
After the discharge has been given, the individual who filed for bankruptcy is free to move on as none of their previous debts will apply any longer. However, some costs may not be let go, in some situations, such as child support costs, student loans, or outstanding tax bills.
But there is a lasting mark left on the credit history of the individual, though, because if they filed for Chapter 7 bankruptcy then the bankruptcy will appear on their credit history for 10 years. If Chapter 13 bankruptcy was used then it will appear on their credit history for 7 years. This can make lending any money extremely difficult in the future as few lenders will be willing to take a chance on someone with a bad credit history; in fact, some major banks refuse to deal with anyone if they have a bankruptcy mark of any kind on their credit history. In this situation, a lender may decide to only lend money to the individual on the condition that the loan is a secured loan, which means personal property may have to be put up as collateral.
Taking on new credit after the bankruptcy process has been completed can be done, but it should be noted that there is no legal protection if any new debts are obtained. This is because an individual can only file for bankruptcy once every 8 years under Chapter 7 bankruptcy and once every 4 years under Chapter 13 bankruptcy.
In some situations, an individual may find that a creditor does in fact contact them about their debts. This can include letters and phone calls demanding that they pay back the debt. If the creditor’s debt was discharged as part of the bankruptcy case then they can’t legally claim any of that debt back because those debts were eliminated by the discharge. To deal with this, it’s advised that a letter is sent to the creditor explaining the situation, but if this doesn’t work then contacting the bankruptcy court for help should be used as a last option.