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How Do I Know if I Should File for Bankruptcy?

July 1st, 2020 at 7:46 pm

Texas bankruptcy attorney, file for bankruptcy in TexasFor many people, the thought of filing for bankruptcy is a scary one. However, for many people, filing for bankruptcy is the best thing they could do for their finances. Filing for bankruptcy allows you to wipe your slate clean and discharge most of your unsecured debts, but it does come with some consequences. Filing for bankruptcy might make your life more difficult in the future, by making it harder to borrow money, lowering your credit score or even affecting your insurance rates. It can be difficult for some people to gauge whether or not bankruptcy is in their best interests, which is where a skilled Texas bankruptcy lawyer can help.

Your Debts Far Exceed Your Income

Think about all of your different types of debt: your mortgage or rent, car payment, all of your different credit cards, and personal loans. How much total debt do you have? Now, think of your income. How much money do you bring in each month? If your monthly debt obligations are much higher than the amount of money you bring in, you may want to consider filing for bankruptcy.

You Face Foreclosure or Repossession of Your Home or Car

Another big reason why people file for bankruptcy is that they are currently experiencing or being threatened with a foreclosure or repossession. When you purchase an expensive object, such as a home or vehicle, it is unlikely that you will buy it outright. Rather, you borrow the money from a lender and repay it over time. If you fail to repay your loan, your property could be taken back. Filing for bankruptcy puts a temporary halt to any foreclosure or repossession actions, giving you time to readjust your finances.

You Have Tried Negotiating with Your Creditors

If you are considering bankruptcy, you have likely already looked at other options for debt relief. One of the easiest things you can do to help lessen the burden is contacting your debtors and seeing if they are willing to work something out with you. Many lenders do not get anything if you file for bankruptcy and will want to work with you, but this is not always the case. If your creditors are unwilling to negotiate or you are still having trouble, bankruptcy might be your best option.

Discuss Your Situation with a San Antonio, TX Bankruptcy Lawyer

Bankruptcy is not for everyone, but for many people, it can give them a second chance with their finances. If you are in debt and are wondering if bankruptcy is right for you, you should speak with a knowledgeable Boerne, TX bankruptcy attorney. At the Law Offices of Chance M. McGhee, we will look over your financial situation with you and determine whether or not bankruptcy would be in your best interests. To schedule a free consultation, call us today at 210-342-3400.




Priority Debts

November 18th, 2019 at 8:00 am

One of the most important aspects of bankruptcy is that all debts are not equal.  “Priority” debts are treated special in a number of ways.

Debts Are Different So the Law Recognizes Some Differences

The law does not treat all debts the same. That’s because you have different kinds of creditors that you owe for very different reasons. The law tries to be practical and so to some extent it respects these differences.

Your debts all fall into three categories:

  • Secured
  • General unsecured
  • Priority

Today we start a series of blog posts covering priority debts.

Priority Debts

Priority debts are specific categories of debts that the law has decided should be treated as more important. Bankruptcy gives them higher priority, especially over “general unsecured” debts. Priority debts have power over you and over other debts in various ways.

Secured debts that are debts with liens on something you own.  Secured debts are special in that the creditor usually has a stronger position because of its lien. The lien gives the creditor power over you if you want to keep whatever secures the debt.  

Most priority debts are unsecured, but some may have a lien and so are secured. Secured priority debts have that much more power over you and over other creditors.  

Reasons for Priority

Each of the priority debt categories have their own different reason to be treated as special.

For example, the two most common categories of priority debts in consumer bankruptcy cases are:

  • Child and spousal support—the support you would owe when filing your bankruptcy case. See Section 507(a)(1) of the U.S. Bankruptcy Code.
  • Income taxes—certain income taxes that meet certain conditions. See Section 507(a)(8).

Support payments are special essentially because society very strongly believes that children and ex-spouses should receive the financial support ordered by divorce courts. Federal bankruptcy law incorporates this social attitude. So support debt has the highest priority in the list of priority debts.

Income tax debts are special because taxes are a debt to the public at large. It’s not a debt to a private person or business. In effect it’s a debt to us all. So it deserves a higher priority than regular private debt. However, unlike support debt which is always a priority debt, an income tax is a priority debt only if it meets certain conditions. Those conditions mostly relate to how old the taxes are. The newer the tax is the more likely it is to be priority. Income taxes that do not meet the required legal conditions are mere general unsecured debts.

Priority Debts in Bankruptcy

In most bankruptcy cases there isn’t enough money to pay all debts. So the laws that determine the order that creditors get paid often determine which debts receive full or partial payment and which receive nothing. Priority debts often receive full payment while general unsecured debts receive less or, often, nothing.

This works very differently under Chapter 7 “straight bankruptcy” vs. Chapter 13 “adjustment of debts.” Our next blog posts will show how.


Debts You Don’t List in Your Bankruptcy Case

April 1st, 2019 at 7:00 am

If you don’t list a debt in your bankruptcy case, and don’t add it in on time, it may not be written off.  So carefully include all debts. 


Supposed to List All Creditors 

You can’t pick and choose which debts to include in your bankruptcy case. The U.S. Bankruptcy Code says that the first duty of a bankruptcy debtor is to provide “a list of creditors.” Section 521(a)(1) of Bankruptcy Code. That list includes secured, priority, and unsecured debts, which you put on Schedules D, E and F, respectively. As these Official Forms state clearly, you must

  • “List All Secured Claims”
  • “List All of Your Priority Unsecured Claims”
  • “List All of Your Nonpriority Unsecured Claims”

In the Declarations page you declare “Under penalty of perjury” that the “schedules filed with this declaration… are true and correct.” That page includes the very stern warning that “Making a false statement … can result in fines up to $250,000, in imprisonment for up to 20 years, or both.”

Truthfully, that is an overly stern warning because penalties like that simply don’t happen in the consumer bankruptcy context. Not for not including a debt!

The point is that it’s a federal crime to intentionally lie on your bankruptcy documents. So you need to list all your debts. Talk with you bankruptcy lawyer if you believe you have a reason for not listing a debt. There’s usually a practical solution to your concerns.

Unlisted Debts Not Written Off

Today’s blog post is not so much about intentionally not listing a debt but doing so inadvertently. If somehow you don’t include a debt in your bankruptcy schedules you risk owing that debt after your case is over.

In the last 5 weeks we’ve covered the following categories of debts not written off in bankruptcy:

  • Criminal fines and restitution
  • Income taxes
  • Child and spousal support
  • Student loans
  • Damages arising from driving intoxicated

Debts “neither listed nor scheduled” in a debtor’s bankruptcy documents are another category of debts not written off. Section 523(a)(3) of the Bankruptcy Code.

If You Forgot a Debt

If you didn’t include a debt in the schedules filed by your bankruptcy lawyer, you can often add it later. But you may need to act quickly.

Figuring out your deadline to add a missing creditor is somewhat tricky. It depends on the nature of the debt and the nature of your case.

The Deadline(s) to Add a Debt

First, if the debt is of the kind that the creditor could object to the writing off of the debt based on certain bad actions by you (for example, lying about your financial situation to acquire the debt), then there is a short, strict deadline. You have to add the debt to the case in time for the creditor to have time to object.  The objection deadline is usually about 3 months after you file your case. So you’d have to add the debt a bit before that. Section 523(a)(3)(B) of the Bankruptcy Code.

Second, if your case gives the creditors the opportunity to get paid something through your bankruptcy case, you have a different deadline to add a debt. Most Chapter 7 “straight bankruptcy” cases don’t give most creditors the right to receive anything from the case. There are no assets to distribute to creditors (when all a debtor’s assets are “exempt,” or protected). If there ARE assets to distribute (because some asset(s) are not exempt), the bankruptcy clerk sends out a notice providing a deadline for creditors to ask for a share of the assets. Creditors do so by filing a “proof of claim” documenting their debt. So in this situation you have to add a debt a bit before that deadline. Section 523(a)(3)(A) of the Bankruptcy Code.

In Chapter 13 “adjustment of debts” cases usually the debtor pays some portion of most or debts. Within a couple of weeks after you file a Chapter 13 case the clerk sends out a notice giving creditors a deadline to file proofs of claim. You have to add a debt a bit before that deadline.

Other Scenarios

What if you may owe a debt but don’t know that you may? For example, someone thinks you’ve caused them some injury or damages but hasn’t told you yet.

Or what if you’ve lost track of a debt or debts because you’ve moved and lost your records? If the debt is not on your credit report, you may have no way to recall and list the debt. Can you write off this debt?

Also, does it matter if a creditor has somehow found out about your case even though you neglected to list the debt?

Finally, what if the debt has been sold from one debt collector to another without your knowledge? How can you list a debt in order to successfully write if off if you don’t know who you owe?

We’ll cover these other scenarios next week.


Permanently Write Off Debts in Bankruptcy

December 14th, 2016 at 8:00 am

The main goal of bankruptcy is often to write off—“discharge”—your debts. Here’s how it works in Chapter 7 “straight bankruptcy.” 

When you file bankruptcy, especially Chapter 7 “straight bankruptcy,” the relief you want is to be free of your debts. Chapter 7 accomplishes this by giving you a “discharge” of all or most of your debts. A discharged debt is permanently written off. It’s explicitly illegal for your creditors to take any further collection action on them.

A Bit of Eye-Opening History

You might think, well of course bankruptcy discharges debt—that’s what it’s supposed to do.

So you may be surprised to learn that for much of the history of bankruptcy there was no discharge of debts. In England, where we get much of our law, back in the 1500s debtors were called “offenders.” Only creditors could file bankruptcy, in order to have the assets of the “offender” seized and sold to pay creditors. After the bankruptcy the creditors could continue chasing the “offender” for any remaining balance owed.  In the 1700s the discharge of debts was added, but only if the creditors agreed to allow it!

Chapter 7 Discharge

Contrast that with what now happens in most consumer Chapter 7 cases. They finish in less than 4 months with a court order discharging all or most of the debtor’s debts. Occasionally the debtor has to give up some asset(s) in return, but not most of the time.

You “Shall” Get a Discharge

Federal law makes clear that under Chapter 7 the “court shall grant a discharge.” (Section 727(a) of the Bankruptcy Code.)  Sure, there are exceptions, which we’ll cover in upcoming blog posts. But the law starts with the strong assumption that you are entitled to a discharge of your debts through bankruptcy.

When Debts are Discharged

Just before the end of a Chapter 7 case the bankruptcy judge signs a court order discharging your debts. The main legal effect of that discharge order is described in Section 524(a)(2) of the Bankruptcy Code as follows:

“A discharge…  operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor…  .”

This means that your creditors can’t do anything whatsoever to collect the debt. They can’t contact you, can’t start or continue a lawsuit against you; they can’t do anything. This injunction against all collection actions lasts forever.

Enforcing This Injunction

This discharge-of-debts law has some teeth. It’s illegal for a creditor to try to collect a debt discharged in bankruptcy. It’s a violation of a federal injunction, and therefore a violation of federal law. As a result creditors very seldom try to collect a debt once it’s been discharged.  

If a creditor nevertheless does try to collect a discharged debt, a bankruptcy judge can hold it in contempt of court for breaking the law and violating its injunction. Section 105(a) of the Bankruptcy Code. The court could require the creditor to pay you punitive damages, your attorney fees, and impose other sanctions. Again, creditors don’t usually invite this kind of hassle and potential punishment.


Creditor Claims and Proofs of Claim

November 16th, 2016 at 8:00 am

In most Chapter 7 cases, there is not much practical effect to what creditors put on their proofs of claim.


Bankruptcy Debts, Claims, and Proofs of Claim

Filing bankruptcy is of course about dealing with your debts. A debt is what you owe to a creditor on its claim against you. A creditor files a “proof of claim” in your bankruptcy case, stating how much you owe and its basis for that. See Section 501 of the U.S. Bankruptcy Code.

Objecting to a Proof of Claim

You as the debtor can accept that proof of claim or you can object to it. You can object that you owe the debt altogether or that the amount is wrong. If you don’t object, the claim “is deemed allowed.” The bankruptcy court assumes that whatever the creditor put into its proof of claim is accurate. See Section 502(a).

If you do object, the bankruptcy “court, after notice and hearing” shall determine the amount of such claim…. and shall allow such claim in such amount… .” See Section 502(b).

What Difference Do Creditor’s Proofs of Claim Make?

The proofs of claim filed by creditors can make all the practical difference in the world. Or they can make no difference at all. It depends on the circumstances of your case.

First of all, in many, probably most, bankruptcy cases there is little or no dispute about how much the debtor owes on his or her debts. So in a case like that you would have no grounds to object to your creditors’ proofs of claim.

Second, in many cases some of the creditors, or even all of them, don’t receive any money through the process. So it doesn’t matter what they put on their proofs of claim. Whatever they claim does not change that they are getting nothing.

Third, even when the creditors are receiving something, often their proofs of claim make no practical difference. They do not affect the amount you pay. That’s because in many consumer bankruptcies there is only a set amount of money available. The amounts of debts reflected in the proofs of claim don’t change what you have to do. There is a limited pot of assets or money that the creditors must share. The amounts in each proof of claim at most just affect how that pot is distributed among the creditors.

And yet, in some cases what the creditors put on their proofs of claim can make all the difference. Let’s look at this in Chapter 7 cases today, and then in Chapter 13s in our next blog post.

What Difference to Proofs of Claim Make in Chapter 7 Cases?

Chapter 7 “straight bankruptcy”—the most common form of consumer bankruptcy—usually does not involve proofs of claim at all. That’s because most of the time there is no money to distribute to creditors at all. That’s because most cases are “no asset” cases—everything the debtor owns is “exempt,” protected from the creditors. The Chapter 7 trustee has no right to take anything to “liquidate” on behalf of the creditors. With nothing to liquidate, there’s nothing for the trustee to distribute, and no reason for the creditors to file proofs of claim. Indeed, at the beginning of a consumer Chapter 7 case creditors are often told not to file proofs of claim. They’re told that if the trustee does find assets to distribute creditors will then be asked to submit their claims.

And even in the small minority of Chapter 7s that are “asset” cases, the proofs of claim make little difference. That’s because there is a very limited pool of money distributed—the proceeds of the trustee’s sale of non-exempt assets. The amount generated from that sale is puny compared to the amount of the debts. And the amount available for the creditors is fixed. So, as mentioned above, there is a limited pot of assets or money that the creditors must share. The amounts in each proof of claim at most just affect how that pot is distributed among the creditors. It doesn’t increase or affect what you have to do.

Let’s make this clearer with a simple example. You have one of those somewhat unusual Chapter 7 cases in which you have a non-exempt asset. You closed a business and have some leftover business equipment. Or a boat you no longer want to maintain. Either way let’s say the trustee sells whatever is not exempt for $5,000. You owe $3,000 in “priority” income taxes to the IRS, plus $100,000 to all your other creditors. The trustee is required to pay the taxes in full before paying anything to the other creditors. He or she also receives a fee of as much as 25% the $5,000 for doing the liquidation and distribution. There is less than $1,000 left over for the other creditors, who are paid pro rata based on their proofs of claim.

So you can see that, with that limited amount to distribute, it hardly ever makes any practical difference what all the other creditors put on their proofs of claim in most Chapter 7 cases.


“Pre-Petition” and “Post-Petition” Debts in Chapter 13

November 11th, 2016 at 8:00 am

There are various ways of dealing with debts that arise during the course of your Chapter 13 “adjustment of debts” case.


On Monday we wrote about debts that arise before filing a Chapter 7 case and those that arise after filing.  Those that arise before filing—“pre-petition” debts—are included in the “straight bankruptcy” Chapter 7 case. If they are the kind of debts that can be written off in bankruptcy (“discharged”), then they are. Those debts that arise after filing—“post-petition” debts—are not included and are not discharged.

A Chapter 7 case usually takes only about 4 months to complete. There is nothing in the law preventing you from incurring new debts at any time. On the other hand a Chapter 13 “adjustment of debts” case takes 3 to 5 years. You are usually not allowed to incur new debts during that time except with court or trustee permission. Also, your payment plan is based on a budget that usually does not have room for paying any new debts. So Chapter 13 presents some special issues in dealing with pre-petition and post-petition debts.

Post-Petition Debts in Chapter 13

Just like in Chapter 7, in Chapter 13 post-petition debts are not covered in the case. That means that a new debt can usually not be added to your pre-petition debts in your Chapter 13 plan. In particular, you can’t discharge a post-petition debt in part or in full along with your pre-petition debts. Instead, you have to pay any post-petition debt in full.

But there are usually sensible ways of dealing with them.

For Example

To make practical sense of this, here are some examples of post-petition debts in a Chapter 13 case.

Minor new debts usually cause no problems. These are more like expenses than debts. For example, if in the middle of your Chapter 13 case you have a doctor’s appointment, and a couple weeks later you get a bill for $120 for the part that your medical insurance didn’t pay, that $120 is technically a new debt. But hopefully your budget allows for it, and you have the money to pay the bill when you get it.

What if the debt is larger, say, $850 to replace all the tires and the brake rotors/pads on your vehicle? Your Chapter 13 budget should have some money every month earmarked for vehicle maintenance and repairs. In the best case scenario you’ve not needed to use that monthly amount during the last several months, and have saved it for just this kind of situation. So you have the $850 available when needed.

But you may not have that money, if it’s gone to ongoing vehicle maintenance and repair costs or other expenses. If you don’t have the money right away, and you can delay getting the tires and brakes for a few months, you could set the budgeted amount aside each month until you have enough.

Amended Chapter 13 Plan or Permission to Incur New Debt

But what if those tires and brakes were at the point that it’s really unsafe to wait? Then your bankruptcy lawyer may be able to solve the problems by amending your Chapter 13 plan. That may reduce your plan payments temporarily, or maybe even permanently, so that you can afford the tires and brakes.

Or the vehicle repair shop may be willing to let to pay on credit. If so, it may be pretty straightforward for you to incur that new debt. You may simply be allowed to do that if the amount of credit is under a certain dollar amount. Or there may be a straightforward procedure in your jurisdiction to get permission from your Chapter 13 trustee or bankruptcy judge. Or if necessary, your lawyer can incorporate that change into a formal amended Chapter 13 plan.

There is very likely some sensible way to deal with this kind of needed new debt.

A Large New Post-Petition Debt

What if you unexpectedly incur a much larger new debt because of some emergency during your Chapter 13 case? A vehicle accident or medical emergency come to mind.

Again, the new debt can’t be included in your Chapter 13 case, and can’t be discharged. So, depending on how much would not be covered by insurance, having to pay that new debt could jeopardize your ability to pay your Chapter 13 plan payments. That situation may be helped by amending your plan, but sometimes that’s not enough. This is all especially true if that accident or medical emergency significantly affects your income and expenses.

There are two relatively drastic solutions to such drastic changes in circumstances.

You could convert your Chapter 13 case into a Chapter 7 one. Your changed circumstances may make the goals of the Chapter 13 case no longer desirable or feasible. The converted Chapter 7 case can include the new debt—indeed any debts incurred since the Chapter 13 filing.

Or you could dismiss your present Chapter 13 case and file a new one. If the goals of the original Chapter 13 case are still viable, including the new debt(s) in a new Chapter 13 case may be your best solution. There is generally no problem getting the bankruptcy court to dismiss a case under these circumstances. And there is no restriction on filing a new case if you did not receive any discharge of debts in the prior one.

The bottom line is that if new debts arise during a Chapter 13 case, there are generally ways to deal with them.


“Pre-Petition” and “Post-Petition” Debts in Chapter 7

November 7th, 2016 at 8:00 am

The timing of your Chapter 7 “straight bankruptcy” case can make a huge difference in dealing with your debts.


Chapter 7 Timing

So much in bankruptcy is related to timing, especially the timing of the filing of your case. Let’s start today with Chapter 7, the most common type of bankruptcy.

You start a Chapter 7 case by filing a “petition” at the Bankruptcy Court. Everything that happens before you file your case is called “pre-petition.” Everything that happens after that is “post-petition.”

Pre-Petition Debts

Specifically, the timing of your Chapter 7 case affects how your debts are treated.

Debts that you owe as of the time you file that petition are pre-petition debts. Your bankruptcy case deals with those debts.

Your bankruptcy does not deal with debts that become due after you file your case—post-petition debts.

In a Chapter 7 case there are two main practical consequences arising from a debt being pre-petition vs. post-petition: 1) whether the debt is discharged (legally written-off), and 2) whether the debt is possibly paid by the Chapter 7 trustee.

1) Potential Discharge

Simply put, among those types of debts that can be discharged, pre-petition debts are discharged in bankruptcy while post-petition ones are not. The debt has to exist at the time of your bankruptcy filing in order for it to be discharged.

2) Potential Trustee Payment

Chapter 7 is a liquidation procedure, although one which, in the vast majority of consumer debtors, does NOT involve the liquidation of anything. That’s because everything that most people own are covered and protected by property exemptions. Only those assets that aren’t are subject to liquidation by the trustee.

So, in relatively rare Chapter 7 cases, the trustee liquates some of your assets and pays creditors from the proceeds. Only creditors with pre-petition debts are eligible to share in these proceeds.

Distinguishing between Pre- and Post-Petition Debts

In bankruptcy law a debt is a “liability on a claim.” A “claim” is a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed…  .” See U.S. Bankruptcy Code Sections 101(5) and 101(12). So a debt exists even if you don’t know how much you owe, or even if you dispute that you owe it.

Usually it’s easy to know exactly when a debt legally becomes a debt. It’s when you sign a contract, buy something on a credit card, have a medical appointment, and such. The triggering event is usually pretty obvious. But it’s not always so easy to know whether a debt is pre-petition and therefore included in your bankruptcy case.

1) Mortgages, Vehicle Loans, Other Secured Installment-Payment Debts

You usually owe monthly payments on this kind of debt, some due before your bankruptcy filing date, some after. But it’s not the payment due date that counts here, rather it’s when the entire debt was incurred. If you signed the mortgage or loan before filing the Chapter 7 case, it’s a pre-petition debt.

2) Medical Bills

If you have a doctor appointment one day and file bankruptcy the next day, the fee for the doctor’s services is a pre-petition debt even though you may not receive a bill until weeks later. The doctor provided the services pre-petition, and you became liable for paying for those services at that time.

But what if the lab performed a skin biopsy that day, with a pathologist analyzing the results a week later? The cost of the biopsy itself would be pre-petition but the pathologist’s fee would be post-petition. Doesn’t matter that you didn’t know the cost of doing the biopsy, or even that you owe something for it. What counts is that you became liable to pay for the biopsy when the service was provided.

The situation can get more confusing. Imagine if you negligently caused a vehicle accident, injuring the other driver, requiring 6 months of physical therapy. Putting aside any insurance coverage, if you file your Chapter 7 case halfway through those 6 months of physical therapy, how much of that is pre-petition and dischargeable? Arguably, you became legally liable for all the resulting injuries at the moment of your negligence, at the time of the accident. So, all of the physical therapy costs would be pre-petition and dischargeable. It doesn’t matter that you don’t know what services will be required and what they will cost. You became liable for paying for whatever services would be required and however much they would cost at the time of the accident.

3) Leases

Leases are also pre-petition obligations as long as you signed the lease agreement before you filed for bankruptcy.

So if you return a leased vehicle or surrender the premises of a residential lease, you can discharge the entire debt. It doesn’t matter that the lease term extends for months or years after you filed your bankruptcy case.  

4) Homeowner and Condominium Association Fees

You generally owe ongoing homeowner/condo association dues and assessments as long as you are the title owner of the property. Chapter 7 will discharge your personal liability for any amounts that become due to your homeowners or condominium association pre-petition. But bankruptcy does not discharge any amount which becomes due after the date you filed your case.

Again, this is true even if you intend to surrender the home/condo in your bankruptcy case, and give notice of that intent. You are responsible for post-petition dues and assessments that come due while the property is titled in your name. The lender must complete a foreclosure, accept your deed in lieu of foreclosure, or you must transfer title out of your name in some other way to avoid being liable on the post-petition dues and assessments.   


Debts Not Discharged in Chapter 7 Bankruptcy

April 11th, 2016 at 7:00 am

Most debts can be discharged—permanently eliminated—in bankruptcy. Here are the exceptions.


The vast majority of debts are “discharged”—legally written off—when you file a “straight bankruptcy” Chapter 7 case.

All Debts Discharged Unless Fits an Exception

Bankruptcy law strongly states that as long as you go through the process appropriately your debts will be discharged. That includes all debts unless you have any debts that are on a limited list of the kinds of debts that are not discharged.

Debts that MAY not be Discharged vs. WILL not be Discharged

These exceptions to discharge are of two categories: 1) debts which MAY not be discharged if the creditor objects and succeeds in that objection, and 2) debts which WILL not discharged even without any objection raised by the creditor.

Creditor Must Object to Stop Discharge

In the first category, creditors can challenge your ability to discharge three kinds of debt. These debts are still discharged unless the discharge is challenged and the creditor persuades the bankruptcy court that the debt should not be discharged:

  • Debts that incurred when a debtor makes a misrepresentation or committed fraud in order to get a loan or credit. This misrepresentation or fraud includes an intentional falsehood on a loan application, cash advances or use of a credit card when the debtor had no intention of paying back that credit, or any other method of deceitfully incurring a debt. 
  • Debts resulting from the debtor’s theft or embezzlement, and from fraud against a person to whom he or she owed loyalty in a trust relationship. These include stealing from an employer, cheating a business partner, and using duress to pressure an elderly relative to change his or her will in the debtor’s favor. 
  • Obligations resulting from intentionally and maliciously harming a person or business, or his or its property. This includes bodily injuries and property damage caused intentionally, such as during a domestic disturbance or bar fight. It might include injuries caused recklessly as well as intentionally.

The person or business to whom a debtor owes any of these three kinds of debts must file a formal “adversary proceeding”—a type of limited lawsuit—in the bankruptcy court, usually within 60 days of your meeting of creditors. Otherwise that debt is discharged forever along with the rest of the debts.

Debt Not Discharged Even Without Objection

In this second category, creditors do not need to object (and virtually never do) for the following types of debts, which are still not discharged:

  • Criminal fines, fees, and restitution
  • Income taxes, and other forms of taxes, IF they meet certain conditions
  • Child support, spousal support and maintenance
  • Most, but not all, student loans
  • Claims for bodily injury or death from driving a vehicle, boat, or aircraft while intoxicated
  • Debts not listed in your bankruptcy schedules, under certain conditions

The Discharge of Debts in Bankruptcy

April 8th, 2016 at 7:00 am

In your goal of getting a fresh financial start, your most important tool is the “discharge”–the permanent legal elimination of your debts.


Whether you file a Chapter 7 “straight bankruptcy” or Chapter 13 “adjustment of debts,” they are both designed to finish with a discharge of some or all of your debts. A discharge gives you permanent relief from your debts. It does so by making it illegal for your creditors to take any further collection action on them.

Chapter 7

Most Chapter 7 cases finish in less than 4 months with a court order discharging all or most of your debts. Sometimes you have to give up some asset(s) in return, but not usually.

Chapter 13

Chapter 13 cases take a lot longer and usually (but not always) require paying at least something to all your creditors. Chapter 13 requires proposing and getting approval of a formal plan of payments lasting usually 3 to 5 years. Your successful completion of this payment plan results in the discharge of all or most of your remaining debts.

You “Shall” Get a Discharge (Unless There’s a Specific Exception)

The Bankruptcy Code makes clear under both Chapter 7 and 13 that the “court shall grant a discharge.” (See Sections 727(a) and 1328(a) of the Bankruptcy Code.) Yes, there are exceptions. But the law starts with the assumption that you are entitled to a discharge of your debts through bankruptcy.

There are some specific categories of debts that simply aren’t discharged. But otherwise the burden is on your creditors and your bankruptcy trustee to object to your entitlement to the discharge. Those objections are relatively rare, and your lawyer will inform you about any that may apply to you.

What Happens Exactly When Debts are Discharged?

Near the very end of both a Chapter 7 and Chapter 13 case the bankruptcy judge signs a court order discharging your debts. The legal effect of that discharge order is described in Section 524(a)(2) of the Bankruptcy Code as follows:

“[It] operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor…  .”

This means that your creditors can’t sue you, can’t continue with an ongoing lawsuit against you, and can’t take any action at all to collect the debt. This injunction lasts forever.

Enforcing This Injunction

For a creditor to try to collect a debt discharged in bankruptcy is illegal. It’s a violation of federal law and of a federal court order. So creditors very seldom try to collect a debt once it’s been discharged.  

But if a creditor does do anything to try to collect a discharged debt, a bankruptcy judge can hold this creditor in contempt of court for breaking the law and violating its order. Depending on the seriousness of the creditor’s illegal behavior, the court may require it to pay you punitive damages, your attorney fees, and other possible sanctions.


Our next blog post will get into the specific types of debts that would not or may not be discharged.


FAQs about Chapter 7 Bankruptcy

June 5th, 2015 at 8:12 am

Texas bankruptcy attorney, Texas chapter 7 lawyer, Texas chapter 13 attorney,Although much of the United States seems to have recovered from the Global Financial Crisis, thousands of Americans still declare bankruptcy every year. Although many are familiar with the general implications of bankruptcy, few first-time filers understand the intricate laws and how they relate to their particular case.

To shed some light on this complex legal field, here are four common chapter 7 bankruptcy FAQs:

What Makes Chapter 7 Unique?

Unlike chapter 13 bankruptcy, which restructures debt into a manageable payment plan, chapter 7 involves the liquidation of assets to pay off creditors. Depending on the types and amount of debt, chapter 7 bankruptcy may allow the filer to pay off his or her debts completely.

Is Chapter 7 Right for Me?

Before deciding to file for chapter 7 bankruptcy, you should find out if you qualify in the first place. Chapter 7 is available to any legal entity, individual or otherwise, according to

In order to be eligible, you must attend credit counseling within 180 days before applying for chapter 7 bankruptcy. When filing, you must have enough income to pay your debts. There are other factors involving your legal and bankruptcy histories that may influence your eligibility. A bankruptcy attorney can assess your case to help you decide if filing for chapter 7 is the right decision.

What Information Will the Courts Require?

Like other forms of bankruptcy, chapter 7 requires an individual to file a petition. An attorney can help with the necessary paperwork. You will need to list all creditors, debts owed, and assets. You will also need to provide a comprehensive record of your income and living expenses.

Will I Lose My Home?

Chapter 7 involves the liquidation of assets to pay debts. You may have to sell your home or other properties during this process. However, this is not always necessary, and a lawyer can help you develop a bankruptcy plan that represents your best interests.

If you would like to speak with an experienced San Antonio bankruptcy attorney, call the Law Offices of Chance M. McGhee at 210-342-3400 for a free consultation.

Call today for a FREE Consultation


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