Louisville, KY, has one of the highest bankruptcy rates in the country. Almost all of our clients, however, have their FICO scores increase and keep all of their property; and within a short time, are able to rebuild their credit scores to 725
For many city residents, filing for bankruptcy can be a last resort to overcome overwhelming debt and regain financial stability.
The bankruptcy discharge comes at the end of the case. The automatic stay is a temporary order which the discharge permanently replaces. The debtor receives copies of the discharge order once it is granted, ensuring legal protection from discharged debts owed. It requires completion of the personal financial management course to obtain the debtor’s discharge.
Discharged debts are the most critical aspect of the bankruptcy proceeding. The court generally grants a discharge, which provides a fresh financial start. Not all debts are dischargeable, such as child support, alimony, taxes less than three years old, willful and malicious injury, and most student loans.
Bankruptcy Discharge: A Quick Overview
Essentially, discharge refers to the final court order and elimination of certain debts that are eligible for discharge in a bankruptcy case. A debtor is no longer legally obligated to pay discharged debts, and the creditor is prohibited from attempting to collect them.
The discharge process can vary depending on the type of bankruptcy filed. Chapter 7 cases do not have to file a request for discharge, and Chapter 13 cases do.
Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” is designed to eliminate most unsecured debts and provide a fresh start for the debtor. In a Chapter 7 case, the discharge is typically granted within about 4 months after the case is filed. Most clients keep all of their property and repay nothing in these cases.
In contrast, Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” involves a repayment plan that allows the debtor to pay back some or all of their debts over a period of three to five years. Once the plan is completed, any remaining eligible debts are discharged. Chapter 13 is most often used to save a home from foreclosure.
What types of debts can be discharged in bankruptcy?
In general, most unsecured debts can be discharged, including credit card debt, medical bills, and personal loans.
However, there are some exceptions, such as certain tax debts, student loans, and debts incurred through fraud or willful misconduct. It’s important to note that even if a debt is eligible for discharge, the debtor may have to pay secured debts, such as mortgages or car loans if they choose to keep the property securing those debts.
A debtor’s discharge can be revoked or denied if there are fraudulent activities or failures to provide necessary documentation.
On the other hand, some debts cannot be discharged in bankruptcy, regardless of the circumstances.
For example, child support and alimony obligations, as well as most property or trust taxes owed to government agencies, cannot be discharged in bankruptcy. Additionally, debts incurred through willful or malicious injury to another person or their property or debts arising from DUI-related accidents may not be eligible for discharge.
The Bankruptcy Discharge Process in Louisville, KY
In Louisville, KY, the discharge process in a bankruptcy case can be complex and time-consuming.
It is crucial for debtors to disclose all property belonging to the bankruptcy estate to avoid potential revocation of the discharge due to undisclosed assets or fraudulent misrepresentation.
However, with the help of a qualified bankruptcy attorney, debtors can navigate this process and obtain the relief they need from their financial burdens.
Let’s take a closer look at the steps involved in obtaining a discharge in a bankruptcy case filed in Louisville, KY, as well as the roles of the bankruptcy trustee, the debtor, and the creditors.
Step 1: Filing the Bankruptcy Petition
The first step in the discharge process is filing a bankruptcy petition with the United States Bankruptcy Court in Louisville, KY. This document provides detailed information about the debtor’s financial situation, including their assets, debts, expenses, and income.
The bankruptcy petition must comply with the federal bankruptcy code, which outlines the types of debts that can be discharged.
Step 2: Meeting with the Bankruptcy Trustee
After the bankruptcy petition is filed, the debtor will attend a meeting with the bankruptcy trustee assigned to their case. This meeting, known as the “341 meeting,” allows the trustee to ask the debtor questions about their financial affairs and ensure that the information provided in the bankruptcy petition is accurate and complete.
The meeting with the bankruptcy Trustee is conducted according to federal rules, which also dictate the process of notifying creditors about the discharge.
Step 3: Reviewing Creditor Claims
Creditors have a certain amount of time to file claims in the bankruptcy case, indicating the amount of money they believe the debtor owes them. Creditors are notified about the discharge of debts owed to them and are urged to cease collection attempts. The trustee will review these claims and may object to any that are inaccurate or improper.
Step 4: Completing Debtor Education Courses
Before a discharge can be granted, the debtor must complete two education courses: a pre-filing credit counselling course and a post-filing debtor education course. These courses are designed to help the debtor understand their financial situation and learn strategies for managing their finances in the future.
It is crucial to complete a course on personal financial management as part of the bankruptcy process. Failure to complete this course can lead to the denial of a bankruptcy discharge in Chapter 7 and Chapter 13 cases, emphasizing its role in demonstrating financial responsibility and compliance with court requirements.
Step 5: Receiving the Discharge
If the debtor has completed all of the necessary steps and no objections have been raised, the bankruptcy court will issue a discharge order. This order officially eliminates eligible debts and provides the debtor with a fresh financial start.
Throughout the discharge process, the bankruptcy trustee plays a critical role in overseeing the case and ensuring that the debtor and the creditors follow the bankruptcy code rules.
Moreover, the debtor must also fulfil their responsibilities by providing accurate information and completing the necessary education courses.
Creditors have the right to object to the discharge of certain debts and may also participate in the distribution of any assets liquidated in the bankruptcy case.
Debts That Can Be Discharged
A bankruptcy discharge can eliminate a wide range of debts, providing relief to individuals struggling with financial burdens. The following types of debts can typically be discharged in a bankruptcy case:
- Unsecured debts, such as credit card debt, medical bills, and personal loans
- Collection agency accounts
- Utility bills
- Income taxes over 3 years old and certain tax penalties
- Attorney fees
- Judgments from lawsuits
- Lease contracts
However, not all debts can be discharged in bankruptcy. Debts that are typically non-dischargeable include:
- Child support and alimony
- Student loans (except in cases of undue hardship)
- Criminal Fines and penalties
- Taxes
- Debts incurred through fraud or willful and malicious conduct
- Debts incurred through embezzlement or larceny
- Debts incurred through breach of fiduciary duty
It’s essential to note that the dischargeability of debts can vary depending on the type of bankruptcy filing and the specific circumstances of the case. A bankruptcy attorney can help determine which debts can be discharged and which cannot.
Benefits of Obtaining a Discharge in Bankruptcy in Louisville, KY
Obtaining a discharge in bankruptcy is a major benefit for debtors in Louisville, KY, who are struggling with overwhelming debt. A discharge provides significant relief from financial burdens, including eliminating eligible debts and obtaining a fresh financial start.
Certain debts, including those resulting from willful and malicious injuries, are explicitly excluded from discharge and remain the debtor’s responsibility. A discharge can help debtors avoid harassment from creditors and prevent wage garnishment, attaching a bank account or home and other collection actions.
Elimination of Discharged Debts
One of the primary benefits of obtaining a discharge in bankruptcy is the elimination of eligible debts. This includes unsecured debts such as credit card bills, medical bills, and personal loans. Most student loans are not dischargeable in bankruptcy under standard circumstances, although recent changes have made federal student loans potentially dischargeable through specific legal proceedings. Once these debts are discharged, the debtor is no longer responsible for paying them back. This can provide significant relief from financial stress and allow the debtor to focus on rebuilding their financial future.
Fresh Financial Start
Another advantage of obtaining a discharge is the ability to obtain a fresh financial start. This means that the debtor can start over with a clean slate and work to rebuild their credit and financial stability. Debts related to personal injury caused by the debtor’s operation of a motor vehicle while intoxicated are non-dischargeable under the Bankruptcy Code. A discharge can also provide an opportunity for debtors to learn from their financial mistakes and develop better financial habits for the future.
Harassment from Creditors
Many debtors in Louisville, KY, who are struggling with overwhelming debt experience harassment from creditors. This can include constant phone calls, threatening letters, and even legal action such as wage garnishment or bank levies. Obtaining a discharge can put an end to this harassment, as creditors are no longer able to collect on discharged debts.
Prevention of Wage Garnishment and Other Collection Actions
Another advantage of obtaining a discharge is the future prevention of wage garnishment and other collection actions. When a debtor files for bankruptcy, an automatic stay is put in place that prohibits creditors from taking collection actions against the debtor during the bankruptcy. This means that wage garnishment, bank levies, and other collection actions must stop immediately.
As a bankruptcy attorney in Louisville, KY, I understand the significant benefits of obtaining a discharge in bankruptcy. I work closely with my clients to help them navigate the discharge process and obtain the relief they need from overwhelming debt.
If you are struggling with debt, contact me today to schedule a consultation and learn more about your options for obtaining a discharge in bankruptcy.
Rebuilding Credit After Bankruptcy
Rebuilding credit after bankruptcy can be a challenging but achievable process. Here are some steps to help you get started:
- Make on-time payments: Payment history accounts for 35% of your credit score, so making timely payments on new credit accounts is crucial.
- Keep credit utilization ratios low: Keep your credit utilization ratio below 30% to demonstrate responsible credit behavior.
- Monitor credit reports: Check your credit reports regularly to ensure they are accurate and up-to-date.
- Avoid new credit inquiries: Applying for too many credit cards or loans can negatively impact your credit score.
- Build a long credit history: A longer credit history can help improve your credit score over time.
Additionally, consider the following tips:
- Apply for a secured credit card: A secured credit card can help you establish or rebuild credit.
- Become an authorized user: Becoming an authorized user on someone else’s credit account can help you benefit from their good credit habits.
- Take out a personal loan: Taking out a personal loan and making timely payments can help demonstrate responsible credit behavior.
Remember, rebuilding credit after bankruptcy takes time. By following these steps and maintaining good credit habits, you can improve your credit score and achieve financial stability.
