How to Discharge Debt

If you’re unable to pay back your debt, you may be able to discharge the debt through bankruptcy. A successful debt discharge means you are no longer legally responsible for repaying the debt. After you’ve had your debt discharged, your creditors and lenders can never try to collect the debt from you. This includes hiring a third-party debt collector to collect the debt from you. Creditors who try to get you to pay a discharged debt are violating federal law. The process to have your debt discharged begins with a bankruptcy filing.

Start the Debt Discharge Process

Before you can apply to have your debt discharged, you must enroll in a government-approved credit counseling program. The United States Department of Justice website has a listing of the approved credit counseling agencies in your state. You can also call 1-202-514-4100 to get help locating your state’s government-approved agencies.

The Discharge Means Test

To have your debt discharged through bankruptcy, you must also take a means test that determines which type of bankruptcy you must file. The means test shows whether you’re able to complete a repayment plan and ultimately if you should file Chapter 7 or Chapter 13 bankruptcy. If your income is below the median income for your state, you’re eligible to discharge your debt under Chapter 7 bankruptcy. If not, then you will likely have to file for Chapter 13 bankruptcy to discharge your debt.

How Long Does Discharge Take

When you file chapter 7 bankruptcy, your debt will typically be discharged four months after you file. However, if you file individual chapter 11 or chapter 13 bankruptcy, your debt won’t be discharged until after you’ve completed your three- or five-year repayment plan.

Debts That Can’t Be Discharged

There are certain types of debt you can’t discharge. This includes:

• Spousal or child support
• Alimony
• Government fines and penalties
• Most student loan debt
• Debts incurred as a result of a DUI

You may be able to get these types of debts discharges on an exception. However, it is not normal and at the discretion of the judge handling your bankruptcy case.

What Can Stop a Discharge

You’ll typically have your debts automatically discharged after filing bankruptcy unless one of these things happens:

• You don’t get the required credit counseling
• You try to hide property from the bankruptcy court
• You destroy financial records
• You try to have your debts discharged too soon after a previous discharge

What Creditors Don’t Want You to Know

Your creditors and lenders don’t want you to get your debt discharged because it means they won’t be getting all or part of the money you owe them. If they realize you’re on the brink of bankruptcy, they may make it easier for you to repay your debt by lowering your interest rate or minimum payment.

Creditors will try to discourage you from having your debts discharged by making it seem impossible or exaggerating the consequences of bankruptcy. For example, they may tell you that you’ll lose property during bankruptcy. The truth is many people who file bankruptcy get to keep their home, vehicle, and other valuable assets. Another scare tactic is the fact that debt discharge through bankruptcy stays on your credit report for 10 years. While that’s true, it doesn’t mean you won’t be able to get a new credit card for 10 years. In fact, you may even be able to get another credit card soon after filing bankruptcy.

Who Can Discharge Your Debts

Only a judge in the United States Bankruptcy Court can discharge your debts. To have your debt discharged, you should consult an attorney who’s experienced in bankruptcy. The National Association of Consumer Bankruptcy Attorneys is a good place to start your search.