What is the Bankruptcy Discharge?
A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. When a debt is discharged, the debtor is no longer legally required to pay the debt. When the bankruptcy court grants a debtor a discharge, it issues a permanent injunction against any creditor collecting on the debt from the debtor. This order enjoins the original creditor, collection agencies, and even collection attorneys from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.
A discharged debt is not erased. The debt still exists, only payment cannot be collected from the debtor because of the bankruptcy court’s injunction. Violation of that order is punishable by contempt of court, which may be a fine or even jail for the most egregious acts. However, a creditor may still have opportunities to collect.
Although a debtor is no longer personally liable for a discharged debt, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) during the bankruptcy case will remain after the debt is discharged. This is because enforcing the lien is an action against the property (in rem), not against the person (in personam). In this way the bankruptcy laws balance the interests of the debtor and the creditor. For instance, the bankruptcy discharge may prohibit an auto lender from garnishing a discharged debtor’s wages to satisfy an unpaid and defaulted loan, but the law allows the lender to repossess the vehicle. Bankruptcy attorneys are fond describing it this way: "secured property must be paid for or returned."
The bankruptcy discharge does not protect non-filing co-debtors. The discharge injunction only applies to the debtor. A creditor may still enforce its collection rights against a co-debtor. Typically co-debtors are "jointly and severally liable," which means that the non-discharged co-debtor is likely on the hook for 100% of the debt.
If you have special circumstances surrounding your bankruptcy case or need help understanding the bankruptcy discharge, consult with your attorney. Your attorney can explain the difference between dischargeable and non-dischargeable debts, and identify property that is secured.