DEFINITION of 'Discharge In Bankruptcy'

A permanent order that releases the debtor from personal liability for certain specified types of debts, thereby releasing the debtor from any legal obligation to pay any discharged debts. The discharge in bankruptcy order also prohibits creditors from taking any form of collection action on the discharged debts. However, valid liens on specific property to secure payment of debts that have not been discharged, will remain in effect after the discharge, and a secured creditor has the right to enforce the liens to recover such property.

BREAKING DOWN 'Discharge In Bankruptcy'

All debts are not discharged in a discharge in bankruptcy. In fact, there are 19 types of debt that are exempted from discharge for bankruptcy filings under chapters 7, 11 and 12, with a more limited list of exceptions applicable for Chapter 13 filings.

The timing of the discharge also varies, depending on the chapter under which the bankruptcy filing is made. In individual cases under chapters 11, 12 or 13, the court typically grants the discharge as soon as practicable after the debtor completes all payments under the plan.

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