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Bankruptcy Discharge Related Questions

How to remove a negative remark on a credit report after a bankruptcy discharge? Or, what action can be taken against a bank for violating a bankruptcy discharge? This legal process essentially discharges or eliminates a debtor’s or borrowers’ obligation or responsibility of the debt. This is the case unless a new promise or agreement to pay is established. Bankruptcy discharge can be beneficial in dealing with creditors and avoiding lawsuits which can arise from 'failure of payment.' To understand more about this proceeding, read below a few questions about bankruptcy discharge answered by Experts.

After filing Chapter 7 bankruptcy, what is the grace period which creditors can file a lawsuit against the owners of a company? 

The deadline for a creditor filing proofs of claim in a Chapter 7 bankruptcy filing is 90 days from the first date set for the meeting of creditors. However, if the debt was discharged, the creditors lose their right to sue and cannot claim, irrespective of the statute of limitations on filing a lawsuit. This is mainly because a bankruptcy discharge terminates this right. In case a creditor is attempting to collect against a discharged debt, the bankruptcy court can be asked to intervene to hold the creditor in contempt of the bankruptcy discharge injunction as well as obtain sanctions against the creditor for the violation. 

What can be done about a creditor erroneously being excluded from the bankruptcy discharge proceedings in a ‘no-assets’ case?

Case Details: The creditors have not set the account to zero and have instead sold the debt to a collection agency.

The relevant information here is that the debt existed prior to bankruptcy filing and discharge. Despite the original creditor not being listed in the discharge order, the bankruptcy discharge is applicable to the creditors account since the bankruptcy case is a 'no asset’ one. This entails that none of the owners’ assets were sold for distribution of proceeds to creditors, implying that the excluded creditor was not adversely affected by this exclusion. The unlisted debt is considered discharged when the discharge order is granted and obtained from court. Therefore, first the collection agency needs to be sent a copy of the bankruptcy discharge order. In case the creditor insists on seeing the listing of the debt on the schedule, the collector can be informed that there was no distribution of dividend (no assets sold) and that information is not required or necessary. There is no requirement to file a motion to reopen the bankruptcy case to add the omitted debt because this debt is essentially discharged.

Is a person suffering from depressive disorders along with a huge sum of student loans, suitable for a bankruptcy discharge?

Case Details: The person suffers from generalized anxiety, PTSD and has attempted suicide.

For student loans to be discharged in a bankruptcy filing, the debtor needs to file a complaint in an adversary proceeding to determine whether this loan can be discharged. This proceeding is similar to regular civil trials where the student loans lenders are most likely to respond to the debtor’s complaint to determine whether the debt can be discharged and file discovery requests; such as requests for production of documents, interrogatories, deposition, and so on. In such a proceeding, the debtor needs to prove extreme hardship preventing one from paying off the student loans. Along with the adversary proceeding, a voluntary petition for bankruptcy relief should be filed to help get the student loans discharged in bankruptcy. If the court rules in favor of the debtor, the student loans are discharged as part of the bankruptcy case. If the loans are not discharged, the debtor remains liable for the debts. Though it may be challenging to discharge student loans, given the medical circumstances in this case, the chances of getting a bankruptcy discharged is high.

How can a negative remark on a credit report be removed if a bankruptcy discharge has been completed?

Case Details: Loan from Bank of America reflecting in the credit report.

In case a zero balance is not reflecting nor that the loan was discharged in bankruptcy, the bank needs to be informed to report accurate information on the credit file. If no action is taken by the bank, the information needs to be disputed with the Credit Reporting Agencies (CRA) where the credit information appears. Prior to doing so, one is entitled to free copies of their credit report from the main CRAs and these need to be ordered. Next, instructions from each CRA should be followed to dispute the negative information with the particular agency. On the other hand, if the creditor was included in the bankruptcy filing, the loan should show as discharged in bankruptcy, the account should display a zero balance and this information cannot be removed from the credit file.

What action can be taken against a bank for violating bankruptcy discharge by demanding payment and sending notices?

A motion for contempt of court citation can be filed in the bankruptcy court. A motion to reopen the bankruptcy case should also be filed and this can be combined with the motion to cite contempt. Each of the violations of the discharge order should be listed and copies of any correspondence sent to the creditor notifying them of the bankruptcy discharge should be included, even though it is not necessary for such notification to be sent out by the borrower. 

Inability to pay debts can lead to a lot of stress and tension especially if the situation is not conducive or under your control. This is when bankruptcy discharge can be helpful to take the right path and absolve oneself from further liabilities and credit issues. If you have other questions on bankruptcy discharge pertaining to your individual situation, contact legal Experts online for guidance and professional insights, quickly and more importantly, economically.

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