Discharge from Bankruptcy

In some specific types of debts, the provision of bankruptcy discharge makes a debtor free from his or her personal debt. This means, the debtor won’t have to pay for the debt that he or she is discharged from. This bankruptcy discharge restricts the creditors from taking any step to collect money from the debtors for the discharged debts. Creditors are also prohibited from taking any legal action. They can’t send any communication either such as telephone calls, letters, and personal contacts to a debtor asking for the money against the discharged debt.

The timing of the discharge varies, depending on each situation. A debtor will normally be bankrupt for one year. After this period they may be discharged. The discharge is usually granted if you are earning only enough income to keep yourself and your dependants reasonably provided for, and if you have received credit counseling. Credit counseling is required by the Court and is a very important step in the bankruptcy process. It enables you to learn new ways to manage your debts and finances, as well as provides you with knowledge on how to handle situations as they may arise in the future so that you will never become financially burdened again.

Although the debtor is discharged, the proceedings of the bankruptcy continue until an Official Receiver is appointed and he completes his work. A debtor must continue to co-operate with the Official Receiver until the Official Receiver discharges. If the debtor is making a contribution they must continue to pay it to the Official Receiver even after they have been discharged. The Official Receiver remains in office as long as necessary to conclude the administration of the debtor’s estate. It is only when the Official Receiver has dealt with all of the estate and accounted for the work they have done that they can seek their own discharge.

When the Official Receiver has finished the administration, they must complete the court book and, where the Trustee was not the Accountant in Bankruptcy, send it to the Accountant. They may, at the same time, apply to the Accountant for their own discharge. The Accountant in Bankruptcy will examine the court book and, if there have been no objections, grant the certificate of discharge.

However, the discharge may not be unchallengeable. The Court has the right to postpone it. In addition, a debtor’s all types of liabilities may not be necessarily discharged. His unrealized assets may not be protected. The bankruptcy order releases the bankrupt from most of the debts that he owes at the time of the bankruptcy. Indeed, there are few exceptions which include debts arising from fraud, any crime and fines. Certain other debts such as damages or personal injury or money owed under family proceedings will be released only if the court agrees. The Court does not discriminate when considering the discharge of a bankruptcy.

After discharge, any assets that are acquired after the discharge may usually be kept. Although, when discharged there may still be assets that were owned either when the bankruptcy began or which were acquired before discharge, which the Trustee has not yet dealt with. These may include property, an insurance policy or pension, an interest in a will or trust fund. These assets are still controlled by the Trustee, who can deal with them at any time in the future. This may not be for a number of years after the discharge. In certain cases such as your family’s home and some types of insurance policy, a spouse, a relative or a friend may want to buy your interest, in which case, they are to get in touch with the Trustee straight away to find out how much they would have to pay. You must tell the Official Receiver about any assets that may have been obtained after the Trustee has finished dealing with your case but before you are discharged. These assets could be claimed to pay your creditors. You have duty to continue to assist your Trustee after you have been discharged.

Bankruptcy deals with your debts at the date the bankruptcy is ordered. After that date you should be sure to manage your finances more carefully. However, if you incur new debts, while in bankruptcy, this could result in a new bankruptcy order. This could happen even before you are discharged from the first bankruptcy, which may have more serious consequences such as, prosecution, especially if the debts were obtained without disclosing your bankruptcy. Harsher penalties are imposed on those who have been thought to be reckless or irresponsible in dealing with finances and restrictions could last up to fifteen years. The rules surrounding a bankruptcy and discharge are to protect you as well as everyone involved in the community. A discharge is usually given in due time to safeguard you in future financial decisions as well as protect creditors and others in the commercial community that you will be a more responsible borrower.

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