People seek bankruptcy relief to get rid of creditor cards bills. A Chapter 7 bankruptcy permanently eliminates most of your debts—this is called a discharge. A Chapter 13 bankruptcy also eliminates most debts– however you first will need to pay your creditors a percentage of future income.
Actually, I think most people seek bankruptcy protection to stop creditor calls. If bill collectors would ease up on people and give them time to pay their bills, I bet far few bankruptcies would be filed.
A bankruptcy discharge permanently stops debt collectors from attempting to collect on a debt and the courts from enforcing any judgment against a debtor.
Co-signer liability
The discharge actually doesn’t get rid of the creditor’s claim for money however. The creditor can still go after a co-debtor and others who might have made a promise to pay the debt. If you file a Chapter 13, a creditor can’t go after the co-signer until the debt has been discharged by the court. This discharge wipes out debt of the creditor, but the co-signer is back on the hook at that point. This is a real good reason why co-signing is a bad idea.
In a Chapter 7 bankruptcy, legal entities such as a partnership or corporation can’t get a discharge. If an organization seeks a Chapter 7, it generally is going out of business and doesn’t need a discharge. If an organization wants to reorganize, then it files under Chapter 11.
Denial of Discharge
Bankruptcy must be entered into in good faith. A debtor who tries to hinder, delay or defraud creditors may be denied a discharge. In some cases, the debtor can also face criminal charges for certain bankruptcy crimes. The bankruptcy code lists nine reasons why a debtor may be denied discharge.
