Bankruptcy discharge

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A bankruptcy discharge is granted by the bankruptcy court to release the debtor permanently from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The debtor will usually automatically receive a discharge, excepting there is litigation involving objections to the discharge. The discharge prohibits the creditors from taking any form of collection action on discharged debts, including legal action and communications with the debtor. If a creditor attempts collection efforts on a discharged debt, the debtor can file a motion with the court, reporting the action and asking that the case be reopened to address the matter. A creditor can be sanctioned by the court for violating the discharge injunction.

Not all debts are discharged. Although a debtor is not personally liable for discharged debts, a valid lien that has not been avoided in the bankruptcy case will remain after the bankruptcy. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien. In addition, the court may revoke a discharge based on allegations, or a debtor who has received a discharge may voluntarily repay any discharged debt even though it can no longer be legally enforced.

[Last updated in July of 2021 by the Wex Definitions Team]