How to Discharge Your Debt

Carl Andrews

Financial Advisor
Updated: 7/2019

How to Discharge Your Debt

In This Article

Debt Discharge Pros and Cons

Pros

Cons

Sometimes things happen that make dealing with your debt impossible. It’s times like these that you need to seek to discharge your debt through bankruptcy.

Bankruptcy isn’t the end of the world. However, it can be a very intimidating process. Moreover, it’s full of complicated legal terms and issues. That’s why you should always get a lawyer if you’re considering declaring bankruptcy to discharge your debts.

While we’re not lawyers, and this isn’t legal advice, we do have some of the answers to the questions that people ask about discharging their debt. Use this information to get a better understanding of how the debt discharge process works. Then you can make a decision about whether or not bankruptcy is the right option for you.

Understanding Debt Discharge

Everyone has heard of the idea of bankruptcy, but very few people actually understand what the process is. Bankruptcy is a way to get legal protection against people seeking to collect debts. When you successfully complete bankruptcy your debt is discharged. That doesn’t mean that you don’t still owe that money. However, it does mean that companies and collection agencies can no longer sue to force you to pay.

That’s an important distinction. You shouldn’t think that your debts are erased when they’re discharged. That’s not accurate. The thing that changes is that companies can no longer collect the debt through the courts. So this isn’t always a way to get out of debt completely.

Now, this does provide a lot of relief. You won’t have to pay discharged debts. However, people still might try to get you to pay. That means it’s important to keep records of what debts were discharged. You can use this records to stop collection agencies from calling you. You also need to keep records in case anyone tries to take you to court to collect a debt that’s been discharged.

How to Discharge Your Debt

Collections and Debt Discharge

Sometimes businesses will still try to collect on debt that’s been discharged. Usually this is a mistake, as they don’t realize that the debt isn’t collectable anymore. However, sometimes companies, especially debt collection agencies, will continue to hassle someone about discharged debt.

If this occurs then you should contact your lawyer immediately. There are strict laws in place to prevent people from being harassed to pay debt that’s been discharged. There are also lots of regulations that govern how debt collections can take place.

Usually a notice from a lawyer will stop creditors from attempting to collect on a debt. However, if they continue, then you’ll need to take legal action. Your lawyer can give you more information about what that means and what the process would look like.

Benefits of Debt Discharge

There are several benefits to discharging your debt. Here are the most important ones:

The primary benefit of discharging debt is that you aren’t liable for paying that debt back. That means you don’t have to worry about the bills that were discharged. As a result, you can focus on your core priorities and on rebuilding your financial health.

Another huge benefit is stopping collection calls and letters. No one likes it when their phone is constantly ringing off the hook because they owe money, and no one likes getting intimidating letters in the mail demanding payment.

Discharging your debt also allows you to get a fresh start on rebuilding your finances. You can find ways to get secured credit products to rebuild your credit score. Your debt discharge will age off of your credit report in 7 to 10 years, depending on your specific bankruptcy. Taking advantage of the time you have now will set you up to be ready to go when your report gets cleaned up.

It’s also important to understand that while a debt discharge will stay on your credit report for 7-10 years, it loses impact as time goes on. That means even if the record is still on your credit report, it won’t have as much of an impact as time passes. As a result, it’s usually better to discharge your debts earlier rather than later.

Drawbacks of Debt Discharge

There’s no such thing as a perfect debt solution. Therefore, discharging your debt does have a few drawbacks:

It will take a lot of time, energy, and stress to discharge your debts. It isn’t simply a matter of going to court and declaring that you can’t pay your bills. That means you need to be prepared for the process you’ll go through.

One great way to prepare for the process is by hiring a lawyer. This will be necessary if you want to get the best results out of your debt discharge process. It will also be essential for you to understand all the ins and outs of the system.

Another drawback to discharging your debt is that your credit score will take a huge hit. There isn’t anything more damaging to a credit score than a bankruptcy. The good news is that, if you’re considering discharging your debts, your credit score has probably already taken a beating from late and missed payments, charge offs, and the like.

The final drawback is that discharged debts will count as income for the purpose of filing taxes. That means you need to be ready for a larger than usual tax bill. It seems cruel, but this law is designed to help prevent people from exploiting certain systems. You can get more information from your lawyer and find ways to mitigate your tax bill.

How to Discharge Your Debt

General Debt Discharge Questions

This section covers all of the basic questions that people have about discharging debt. We’ll go over things like what debt discharge is and help you understand the fundamentals. Once you’ve got the basics down you can start looking at some of the more complex FAQs.

What Does it Mean when a Debt Has Been Discharged?

When a debt is discharged it means that you’re no longer legally liable to pay the debt. You still owe the money, but no one can force you to pay it back. This level of protection will usually stop businesses from trying to collect on your debt. However, they still might sell your debt to collectors.

What Does it Mean when a Loan Has Been Discharged?

When a loan is discharged you’re no longer legally responsible to repay it. Technically, you still have a balance with the lender. However, the lender can’t take you to court to force you to repay the balance you owe.

Can a Creditor Collect on a Discharged Debt?

A creditor can try to collect on a discharged debt. But you’re under no obligation to pay. Moreover, there are lots of rules regulating collections, so if you tell them to stop contacting you they’ll have to.

Do Governments Discharge Private Debt?

The government pronounces that debt is discharged. It helps to remember what a discharge means. It means you can’t be forced in court to pay the debt. The government runs the courts, so yes, the government can discharge private debt.

What Happens if a Creditor Objects to Discharge?

That depends on lots of specific factors involving your case. Usually there will be court hearings to determine if your discharge is appropriate. You’ll need to talk to a lawyer for more information.

How Long Does a Discharge Take?

Most Chapter 7 bankruptcy cases take between 4 and 6 months to finish. That time covers your various court hearings and gives your creditors a chance to object to your debt discharge.

How to Discharge Debt Legally?

The best way to discharge debt legally is to declare bankruptcy. However, that’s a very serious and drastic move, so make sure it’s the right one for you before you attempt it.

Do I Need Probate to Discharge Debts?

Possibly. You’ll need to talk to your lawyer to find out if you can discharge a specific debt in probate or if probate is necessary. There are different rules about this in different states.

Why is a Discharge of Debt Granted?

A discharge of debt is granted if, through the bankruptcy process, a borrower proves that they won’t be able to repay the debt or that they won’t be able to do so without incurring substantial harm.

How does a Creditor Knows if a Debt was Discharged?

The court and/or your lawyer will inform them that the debt was discharged. If they still try to collect on the debt, then you can tell them. If they continue to try and collect then they’ll be in violation of federal law.

Do You Have to Pay Back Discharged Debts?

No, that’s what a debt discharge is. It means that you’re no longer obligated to pay back the debt that you owe creditors if that debt has been discharged.

How to Use the Promissory Note to Discharge Debt?

It’s unlikely that you’ll be able to use a promissory note to discharge debt. You’ll need to ask your lawyer for more information about your specific case.

What is a Proof of Claim?

A proof of claim is the documentation that a creditor files to get paid during a bankruptcy that involves liquidation of assets. Essentially, it just proves that your balance with them is a certain amount.

Is 1099-C a Cancellation of Debt or a Debt Discharge?

A form 1099-C is a cancellation of debt. You get this form if the lender cancels your debt, not from the process of discharging your debt through bankruptcy.

Discharging Debt in Bankruptcy

Bankruptcy is the process that most people use to discharge debts. This section answers all of the questions you might have about how discharging debts in bankruptcy and the bankruptcy process works.

Is Recourse Debt Subject to Discharge in Bankruptcy?

Recourse debt can be discharged in bankruptcy. However, you’ll need to speak to your lawyer for more information about your specific case and issues.

What Debts Are Discharged in Chapter 7 Bankruptcy?

That depends on several factors. Usually credit card debt, loan debt, and outstanding balances for companies that extend your credit will be discharged. However, you’ll want to see an attorney to find out more.

How Long Does Chapter 7 Stay on Your Credit?

A Chapter 7 bankruptcy stays on your credit report for 10 years after it’s completed. Chapter 13 bankruptcy is deleted after 7 years because you’ll partially repay the debts you owe.

How Soon Can I File Chapter 7 Again?

You must wait at least 8 years before you can file for another Chapter 7 bankruptcy. This law is designed to prevent people from abusing the system by racking up debt and then declaring bankruptcy over and over again.

Do Creditors Get Paid in Chapter 7?

They’ll get some payment. They need to file a proof of claim to help determine what they’re owed and what they’ll get from the liquidation of assets.

What Percentage of Bankruptcies Are Denied?

As long as the case if filed correctly, fewer than 1% of Chapter 7 bankruptcies are denied in the US courts.

How Long Does it Take for a Chapter 7 to Discharge?

The complete process usually takes 4 to 6 months. You’ll get a notice about 60 days after your 341 meeting of creditors hearing.

What Assets Can I Keep in Chapter 7?

The answer to this question is different in every state. Each state has different exceptions for what assets are exempt in a bankruptcy case. A lawyer can provide more information about your case.

Can You Discharge Debt in Bankruptcy Because of Drug Abuse?

Possibly, it depends on lots of factors. This answer requires more legal advice than we’re qualified to give. It also depends a lot on your specific situation, where you live, and so on.

Is Unsecured Debt Discharged in Chapter 13?

Yes, in most cases. It depends if it is a priority unsecured debt or a nonpriority unsecured debts. Most nonpriority unsecured debts will be discharged in bankruptcy.

Are Debts Discharged in Chapter 12?

There is no such thing as Chapter 12 bankruptcy. Many debts will be discharged in a Chapter 13 bankruptcy and almost all of them can be discharged in Chapter 7 bankruptcy.

Is Credit Card Debt Dischargeable in Bankruptcy?

Yes, credit card debt can be discharged in bankruptcy. This is true for both Chapter 7 and Chapter 13. However, the way that your particular situation works will depend on several factors.

What is a Discharge Under Section 727 of Title 11?

This is the section of US code that covers debt discharges. It just means that your debt is discharged and that you can’t be successfully sued to be forced to repay the debt.

How to Discharge Your Debt

Discharging Different Types of Debt

Lots of people have questions about what kinds of debt can be discharged. This section will answer the questions you have about discharging different kinds of debts.

Which Debts Cannot be Discharged?

It depends on the specifics of your case, but usually student loans, tax liens, alimony, debts obtained through fraud, debts for causing injury or death to someone, and debts where the borrower was acting as a fiduciary can’t be discharged.

What is Non-Dischargeable Debt?

Non-dischargeable debt is a type of debt that can’t be discharged through bankruptcy. That means you’ll still be liable for that debt even if you successfully declare bankruptcy. Student loans are a good example of non-dischargeable debt.

What Types of Debts Are Not Dischargeable?

It depends on several factors, like where you live, why you got the debt, and why you’re discharging the debts. Usually student loans, tax liens, alimony payments, child support, and debt resulting from legal judgements can’t be discharged.

How to Discharge Debt With UCC?

The idea of discharging debts using UCC isn’t widely accepted by the courts or lawyers. You’ll need expert legal advice if you’re going to be successful with your efforts.

What Debts Are Dischargeable?

Most debts can be discharged. That includes credit cards, loans, and outstanding balances. However, things like student loans, tax liens, and debt from court judgements can’t be discharged.

What Happens when a Mortgage is Discharged?

You will receive discharge papers that protect you from someone trying to sue you for the mortgage debt. The bank will also likely seize your house and sell it at auction. However, that depends on the laws where you live and the nature of your specific bankruptcy.

How to Discharge Child Support Debt?

Child support debt can’t be discharged in bankruptcy. The only option you have is to get the person to whom you owe the debt to cancel it.

Can Medical Debt be Discharged in Bankruptcy?

Almost always. You’ll need to see based on the laws where you live and the specific nature of your medical debt whether or not it’s eligible to be discharged.

Can IRS Debt be Discharged in Chapter 13?

No. Tax debt is considered a priority debt. That means it can’t be discharged in a Chapter 13 bankruptcy proceeding. You may be able to work out a settlement with the IRS though.

How to Discharge Student Loan Debt?

Student loan debt is extremely difficult to discharge in bankruptcy. You’ll need to meet a much higher standard that shows paying will pose an undue hardship on you and your dependents.

How to Discharge Student Loan Debt of Deceased Person?

You shouldn’t be obligated to pay back student loans for a deceased person unless you were a cosigner on those loans. Additionally, federal loan debt is discharged upon the death of the borrower.

Why Student Debt Cannot be Discharged?

Student loan debt can’t be discharged because legislators and creditors were afraid that students would just declare bankruptcy immediately upon graduation to get out of their debts. Because these people are still young, the time that the bankruptcy would be on their credit report wouldn’t be too damaging to them.

Can I Discharge ROTC Educational Debt Bankruptcy?

No, educational debt and student loans generally cannot be discharged in bankruptcy. You’ll need to meet an incredibly high threshold to get these loans discharged.

Can You Discharge Credit Card Debt Awarded in a Divorce?

Yes, if you are solely liable for the credit card debt as per the divorce, then that credit card debt can be discharged if you declare bankruptcy.

Which Federal Tax Debts Are Dischargeable?

The only time you can discharge federal tax debts is if they are all income taxes and you are filing for Chapter 7 bankruptcy. Tax debt cannot be discharged in Chapter 13 bankruptcy. Refer to our tax debt relief article for more info.

Can You Discharge Medical Debt in Bankruptcy?

Yes, you can discharge your medical debt in bankruptcy. Once you get your discharge you won’t be legally responsible to pay the medical bills you currently owe.

 

Businesses and Discharged Debt

Individual consumers aren’t the only people that accumulate debt and then need to discharge it through bankruptcy. Businesses also have lots of questions about how debt discharges work. This section answers those questions to help businesses better understand the discharge process.

How to Discharge Debt With a Bond?

The idea of discharging a debt with a bond goes back to the idea of discharging debts according to the UCC. The courts and lawyers that deal with bankruptcy don’t generally recognize this particular legal theory.

Can You Discharge Debt Without Being a Secured Party Creditor?

You’ll need to ask advice from a lawyer to get more information on this question. The idea of being a secured party creditor relates to the notion that debts can be discharged through the UCC.

Can I Make a Debt Non-Dischargeable Through Bankruptcy by Contract?

Not usually. A non-dischargeable clause is a pre-petition agreement and is thus usually unenforceable. An attorney can provide you with more clarity on this specific issue.

Are Debts Discharged in LLC Bankruptcy?

Yes, debts will be discharged in LLC Bankruptcy. The corporation’s assets will be liquidated and used to cover outstanding debts. The owners of the LLC won’t be liable in most cases.

Can Discharged Debt be Sold?

Yes, discharged debt can be sold. However, the borrower can’t be forced to repay the debt in court. That means it is functionally selling numbers on paper, as the debt itself has no value.

How May a Debtor Avoid a Discharge of a Debt?

A person cannot have debts discharged if those debts are the result of willful and malicious injury by the debtor. You’ll need more information and specifics and a conversation with a lawyer to get a clear answer to your question.

Other Debt Discharge Questions

There are lots of other questions people have about the process of debt discharges. This section covers all the questions that don’t fit into our other categories. Use it to firm up your understanding of debt discharges and how they work.

Can a Creditor Collect on a Discharged Debt?

A creditor can collect on a discharged debt if the borrower decides to pay, but the creditor cannot force the borrower to pay the debt. That’s what it means for a debt to be discharged.

How to Remove Discharged Debt from My Credit Report?

There are a few options for you. A credit repair specialist may be able to remove the discharge from your report. You can also wait 7 or 10 years, depending on your bankruptcy, for the information to age off the report naturally.

How Long Can a Creditor Attempt to Collect a Debt?

That depends on lots of different factors and issues. The type of debt, how much debt, where you live, and more all determine how long a creditor can attempt to collect on a debt.

Do Creditors Show up at 341 Meeting?

Not usually, as most Chapter 7 cases are considered no-asset cases. That means the creditor doesn’t have any reason to show up to the 341 meeting.

Do You Have to Pay Taxes on Discharged Bankruptcy Debt?

Yes, discharged debt is considered income for tax purposes. You’ll get the necessary forms from your creditors and the court in order to complete your taxes.

Can You File a Reaffirmation Agreement After Discharge?

Yes you can, but you should be very careful about doing so. There are complex laws that regulate reaffirmation agreements and they’re different in different jurisdictions.

Do I Have to Refile Taxes if Debt Discharged?

Sometimes. You’ll need to talk to an accountant or tax attorney to find out more information about your specific case.

Can a Civil Debt be Discharged?

That depends on the nature of the civil debt. If it is in the form of a judgement against you because of a successful lawsuit, then it probably can’t be discharged. You’ll need to talk to your lawyer or lawyers for more information.

How to Find a Date when a Discharge of Debt Occurs?

Bankruptcy proceedings are public information. You can search court records for the documentation you’re looking for to find out what date a discharge of debt occurred.

Carl Andrews


Carl has years of experience helping people tackle debt. As a Senior Financial Advisor, he knows the ins and outs of debt consolidation and debt management. He holds a Masters Degree in Finance and according to him, not all debt problems are the same and that’s why it’s important to take a look at the different options available for your situation.