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How soon is debt discharged under Chapter 7?

Because Chapter 7 is a liquidation approach to bankruptcy that allows many unsecured debts to be wiped out, the discharge is a significant step in the process. An individual debtor residing in Washington, D.C., who has filed a petition under Chapter 7 may view the discharge as the point at which relief is obtained from the stress of their financial troubles, but some relief will come much earlier as a stay on collection activities is issued at the time the petition is submitted.

Prior to discharge in a Chapter 7 case, a meeting is held with both the petitioner and the creditors. This meeting typically takes place between 21 and 40 days after the petition is filed. A trustee must report within 10 days of this meeting about any presumed abuse in the case. A case may be converted to a different chapter if it is determined that Chapter 7 is not appropriate. Otherwise, a discharge is typically ordered within 60 to 90 days of the creditor meeting. From filing to discharge, a petitioner may expect a waiting period of between two and six months.

It is important to remember that not all debts are necessarily discharged in Chapter 7. Unsecured debts are the most common debts that can be wiped out. Secured debts could be discharged if the secured asset is forfeited. In some cases, a petitioner may reaffirm such a debt, retaining the asset and continuing to be obligated to pay the debt. Some debts that are not eligible for discharge include income taxes, government-backed student loans and child support.

There are eligibility requirements for Chapter 7 that a bankruptcy lawyer can discuss with a client. The lawyer can also explore the availability of other possible forms of debt relief that may be appropriate.

Source: United States Courts, "BANKRUPTCY BASICS", October 28, 2014

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