The Definition Of “Discharged”

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The Definition Of “Discharged”

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Getting a debt discharge is the aim of a bankruptcy procedure. A discharged debt is no longer recoverable from the debtor personally.

Individual accountability

Even if such assets weren’t pledged as security and the obligation was unsecured, a creditor with a judgement might utilise legal procedures like levy and garnishment to have access to your non-exempt assets and earnings when you are personally liable for a debt. A discharged debt is no longer personally liable to the debtor following bankruptcy.

Enduring prohibition

A court order against certain activities involving debts that existed before the bankruptcy was filed is known as a bankruptcy discharge. The automatic stay that kicks in when a bankruptcy case is filed is replaced by the discharge injunction. In order to enforce a discharged debt against the debtor or the debtor’s property, the creditor is prohibited from starting or continuing any legal proceedings by the discharge injunction.

After the discharge, any judgement on a debt that existed before the bankruptcy was filed is invalid. Any responsibility arising from circumstances before to filing is also covered by the discharge as long as the affected creditor, or potential creditor, was given notice of the bankruptcy. This includes debts that were liquidated as of the case’s filing as well as those that were not.

Example: Even if the debt is unliquidated since there hasn’t been a trial about the accident, the debtor’s obligation for a vehicle accident in which he was at fault is cancelled. Additionally, the debtor’s obligation to guarantee someone else’s debt before filing the petition is released.

In rem liability or liens

Unless a court decision alters or voids them, most liens—the responsibility of a piece of property for a debt secured by that property—pass through bankruptcy unaltered, despite the fact that personal culpability is erased. Look at the debts that liens are protecting.

A voluntary lien, such as a mortgage, may therefore continue to be a charge on an asset the debtor had at the time the case was filed even after bankruptcy has been discharged.

 

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Involuntary liens, such as tax or judgement liens, continue to be a charge on assets that the debtor had at the time the bankruptcy case was filed, but they do not affix to assets that the debtor purchases after the bankruptcy discharge.

Illustrations

Even after bankruptcy, a home equity loan still has a claim on the real estate. Since the discharge has removed the borrower’s personal accountability for the loan, the lender cannot file a lawsuit against the discharged debtor to try and collect the debt out of current earnings. However, the lien on the property pledged may be foreclosed by the creditor.  A judgement lien does not attach to assets purchased after the bankruptcy is filed, but it may still be a charge on assets possessed before the bankruptcy.

Obviously, the topic of dischargeable debts is central to the entire issue. Some debts are not wiped clean by bankruptcy; these obligations are unaffected by the discharge and continue to hold true to their original terms.


    2022-09-12T07:11:07+00:00