How Bankruptcy Discharge Works
Bankruptcy discharge is a legal document that permanently eliminates your entire debt obligation. After obtaining Bankruptcy discharge you become no longer liable to your creditor. While Chapter 7 Bankruptcy gives you immediate discharge by liquidating your asset, Chapter 13 Bankruptcy helps you to discharge your debt by restructuring the original loan term. It has to be remembered that we cannot discharge all of our debts like alimony, child support or debt arising out of fraud act and criminal act or debt pending on court imposed fines. However, unlike debt settlement services, bankruptcy can legally protect you from any type of creditor harassment in future.
Bankruptcy discharge procedure may work in different ways, depending on whether you are a first time, second time or a third time bankrupt.
If you are first time filing bankruptcy and have no additional income, you can obtain automatic discharge within nine months of completing your duties. But, if you have some surplus income, you will get bankruptcy discharge after 12 months.
For a second time bankrupt person with no surplus income, bankruptcy discharge can be obtainable after 24 moths. And for one who has surplus income, bankruptcy discharge can be achieved after 36 months.
Third time bankruptcy filer will not be able to discharge his debt in the direct manner. He has to appeal to the trustee and then the trustee will file bankruptcy petition to the bankruptcy court. Depending on various criteria, the judge will decide whether you will be granted bankruptcy discharge or not.
However, a bankruptcy discharge can be opposed on various grounds such as criminal investigation, breach of contract or negligence of duties as specified in Bankruptcy and Insolvency Act.
After filing bankruptcy your creditor cannot legally contact you and force you to pay back your unpaid debt. Even, once you file it, an immediate stay order is put in place, enforcing your creditors to halt in your collection effort.
A creditor may hold a trustee deed on the principal property of the debtor. But he cannot move on with foreclosure proceedings if the debtor files Chapter 13 Bankruptcy. If the debtor files Chapter 7 Bankruptcy, then the creditor can contact with the debtor’s attorney to understand how the collateral will be used to pay off his credit.