What Is A Chapter 7 Bankruptcy Discharge Settlement

A bankruptcy discharge settlement is the final step in the bankruptcy process. It means  that a person has been discharged of their debts and they are free to start their life again with a clean slate.

 In legal terms a bankruptcy discharge is where the court orders that the plaintiff is no longer liable for they debts they incurred.

A discharge also means that creditors or debt collection agencies no longer have the right to chase the plaintiff to repay the debts. They can no longer take legal action or communicate in any way whether that be by phone or by letter.

If a creditor does pursue any of the  discharged debts then this is a violation of the settlement. A person should seek legal advise from an attorney  as they have the right to take legal action against the creditor.

Debts Excluded From A Bankruptcy Discharge Settlement

Depending on the type of bankruptcy been filed not all debts will be covered by the settlement.

For example, there are non -exempt debts that cannot be settled under Chapter 7. This means that you will be still liable for these debts. Non-exempt debts can include:

• Debts arising from marital divorce proceedings that include child support, maintenance payments and alimony.
• Taxes relating to property.
• Student loans.
• Government loans.
• Marital divorce property settlement.

Although, these debts cannot be discharged they should be included in the bankruptcy schedule. The debtor is still responsible for these debts.

Debts Discharged In Bankruptcy Cases

For example, under chapter 7 bankruptcy you are able to discharge debts that are unsecured such as outstanding balances on your credit cards and overdrafts.

These are called exempt which basically means they can be wiped out, you are no longer responsible for them. When you file for bankruptcy these exempt debts should be included in the bankruptcy schedule.

Property You May Lose Under Chapter 7 Bankruptcy  

With bankruptcy discharge property settlement one of the key concerns that people have when considering bankruptcy is what property they can keep and what property they may have to give away. Under Chapter 7 the debtor will have to surrender certain assets. This will be determined by the bankruptcy trustee assigned to the case. The trustee will decide and approve which assets need to be given up for sale and the proceeds used to pay off the outstanding debts.

Below is a list of non-exempt (may give up) property filed under Chapter 7:

• Investments such as stocks and shares.
• Bank and cash accounts.
• Second residential property.
• Second auto vehicle.

Property You May Keep Under Chapter 7 Bankruptcy 

Below is a list of exempt (may keep) property filed under Chapter 7:

• Clothing
• Welfare payments
• Agreed amount of equity in the first residential property
• Pension funds
• Certain household furniture
  

Discharging Of Debt

Once the claimant  has reported all exempt and non exempt property the case will move towards a deadline to have any unsecured debts discharged. In regards to secured debts the bankruptcy court will decide if the claimant is to repay the replacement value of the asset. If they claimant cannot afford to do that, then the asset will be repossessed by the creditor. Once a persons unsecured debts are discharged they can proceed to rebuild their credit

Rebuilding Your Credit After Bankruptcy

After being discharged under Chapter 7 the record will remain on a persons credit file for 10 years. When rebuilding your credit you should check your credit report on  a regular basis. Experian,Transunion and Equifax are the 3 major credit reporting agencies that produce your report. By obtaining a copy of each report you will have a better idea of your credit rating.

The reality is that bankruptcy has a huge negative impact on your credit rating and repairing the  damage will take time. It also means that future borrowing can be expensive because the mainstream lenders prefer not to provide credit to people who have recently being discharged from bankruptcy. This means the only option is to approach specialist lenders whose borrowing charges and processing fees will be higher compared to the standard lenders.

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