A debtor wanting most of the debts to be forgiven usually seeks to file chapter 7 bankruptcy instead of other types of bankruptcy such as chapter 13. Under the chapter 7 bankruptcy laws, most debts are discharged and most creditors must cease collecting efforts and any legal actions against debtors. However, the chapter 7 bankruptcy laws include many exceptions.
The chapter 7 bankruptcy laws are complicated because there are many exceptions so many people seek the help of a bankruptcy attorney from reputable law firm like Chung, Malhas & Mantel, PLLC. A bankruptcy attorney can help the debtor file chapter 7 bankruptcy correctly and comply with the necessary laws. If a filer fails to comply with the chapter 7 bankruptcy laws, the case can be dismissed, rejected or converted to another type of bankruptcy filing.
If the bankruptcy court finds it reasonable to issue a discharge order to release debtors of certain debts, creditors can have a say in the matter by filing complaints against the discharge decision of the court. If the creditors do not object to the discharge, the discharge order is often issued within a few months after the first meeting of creditors. The creditors can also file for more time to object.
Almost all chapter 7 cases result in discharge orders. However, there are exceptions. Examples of reasons why a bankruptcy court may deny a discharge is if the court finds evidence that the debtor tries to deceive the court, takes advantage of the chapter 7 bankruptcy laws, illegally transfers assets or hides assets to avoid liquidation. If there is any evidence that a crime has been committed, then the bankruptcy court will reject the case.
If the debtor has secured debts, secured by properties such as a house or a motorcycle, then the creditors of secured debts can still claim the assets that were used as collaterals for the debts even after the discharge order has been issued. If a debtor wants to keep the assets that were used as collaterals, according to the chapter 7 bankruptcy laws, the debtor can reaffirm the debts to keep the assets.
Unsecured creditors must cease collection attempts after the discharge order has been granted. Creditors whose debts have been discharged cannot continue to harass the debtors and pressure them to pay off the debts. Collection agencies must stop all phone calls, letters and other efforts to contact and take action against the debtor.
Debts that are not discharged under the chapter 7 bankruptcy laws, however, can still be collected even after the bankruptcy case is closed. Examples of such debts are alimony, child support, taxes, guaranteed loans and debts that were intentionally created to take advantage of the chapter 7 bankruptcy laws.