Discharge in Bankruptcy

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Discharge in bankruptcy, which is the desired result of a bankruptcy case, means a release of the debtor from further liability for debts that had been subject to bankruptcy proceedings. Discharge and dismissal are different in bankruptcy. While discharge clears the future liability of the debtor, dismissal means the debtor’s bankruptcy case is dismissed. A debtor can be discharged under Chapter 7 or Chapter 11of federal bankruptcy law. For example, for a debtor under Chapter 11 to be discharged, the debtor first needs to file a plan to the bankruptcy court, then the plan needs to be confirmed by the court, and the debtor needs to complete the payments on the plan for the first 3 years, or a longer period but not to exceed 5 years set by the court, the discharge of all the debts of the debtor will be granted.  However, there are exceptions to discharges. For example, taxes or customs duty are usually not dischargeable, debt created from a securities fraud action is usually not dischargeable as well. (see 11 U.S. Code § 523).

[Last updated in June of 2020 by the Wex Definitions Team]