Three Vital Aspects You Should Be Aware Of Regarding Your Bankruptcy Discharge
Bankruptcy, as a legal process, involves a lot of intricate steps. One of the major stages is the bankruptcy discharge. This is the stage where your financial obligations are officially wiped out, and you are no longer accountable for them. However, there is always a time frame for this discharge to occur. In this article, we will guide you through the Three Things You Need to Know About Your Bankruptcy Discharge to help you make an informed decision about filing for bankruptcy.
1. Your Surplus Income Influences Your Bankruptcy Discharge
The time frame for your bankruptcy discharge is partially determined by whether or not you possess surplus income. This surplus income refers to any additional income that exceeds predefined federal guidelines. If your income surpasses the set amount for a family of your size, you would be required to pay half of the surplus to the Trustee, who will then distribute it to your creditors.
For instance, if your income exceeds the guidelines by $500 each month, you are expected to pay $250 of that surplus to the Trustee. This is a significant aspect of your bankruptcy discharge that you need to be aware of.
“If you have surplus income, your bankruptcy discharge may take longer than someone who does not have surplus income.”
2. Individual Bankruptcy Cases Vary
Previously, most first-time bankruptcy cases were discharged after nine months, except in situations with extenuating circumstances. However, this is no longer the norm.
If you are filing bankruptcy for the first time and you possess surplus income, your bankruptcy discharge might occur automatically after 21 months. However, if you do not have surplus income, your bankruptcy might be discharged after merely 9 months.
3. Prior Bankruptcy Filings Extend the Process
The bankruptcy process duration increases for individuals filing for their second or third bankruptcies.
For your second bankruptcy filing without surplus income, your bankruptcy might be automatically discharged after 24 months. However, if you do have extra income, it will take an additional year, or 36 months, before you can be eligible for an automatic discharge.
For third-time filers, there is no automatic discharge. After a minimum of 24 months (or 36 months if you have surplus income), your Trustee must apply to the bankruptcy court for your discharge. You may need to meet certain conditions set by the court for your debts to be eliminated.
Life After the Bankruptcy Discharge
Once your bankruptcy is discharged, you are no longer legally accountable for your financial obligations (with a few exceptions), and you are no longer required to make payments. You are now officially free of your unsecured debts and can begin to rebuild your credit.
Note that you are not eligible for a discharge from bankruptcy unless you fulfill all the duties of a bankrupt — complete the counselling, report income and expenses, etc. Your discharge will be delayed if you have failed to complete those duties.
The Impact of a Windfall
If you happen to receive a windfall while you are still bankrupt (for example: an inheritance, winning the lottery), the proceeds from that windfall would have to go to the Trustee for distribution to your creditors. In simpler terms, if you win the lottery the day before your discharge, your creditors have a right to be paid from the winnings. However, if you win the lottery the day after your discharge, all of the winnings are yours to keep.
Certificate of Discharge
Once you acquire your discharge, you will receive a Certificate of Discharge. It is advisable to keep this certificate as you might need to prove to a credit bureau or an old creditor that you are discharged of the debt.
Discussing Your Bankruptcy Discharge
When considering whether to file an Assignment in Bankruptcy, it’s crucial that you discuss your bankruptcy discharge with your Licensed Insolvency Trustee. Understanding how long you will be bankrupt can influence whether or not bankruptcy is the right choice for you and your family.
