A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, though, debtors should consult competent legal counsel before filing to discuss the scope of the discharge. Generally (and excluding cases that are dismissed or converted) individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case -- generally, 60 to 90 days after the date first set for the meeting of creditors.

Grounds for Denial of a Debt Discharge

The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party. Among other reasons, the court may deny the debtor a discharge if it finds that the debtor:

• Failed to keep or produce adequate books or financial records;
• Failed to explain satisfactorily any loss of assets;
• Committed a bankruptcy crime such as perjury;
• Failed to obey a lawful order of the bankruptcy court;
• Fraudulently transferred, concealed, or destroyed property that would have become property of the estate; or
• Failed to complete an approved instructional course concerning financial management.

Debt "Reaffirmation"

Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted. Depending on individual circumstances, if a debtor wishes to keep certain secured property (such as an automobile), he or she may decide to "reaffirm" the debt. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy. In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt.