What is a Discharge in a Bankruptcy Case?

White Couple Smiling A discharge of a bankruptcy case is when the case has been closed out by the bankruptcy court and the debtor’s debts listed in the bankruptcy are discharged or eliminated. Of course, secured debts such as houses and cars are not necessarily eliminated by the discharge. For example, if the debtor filed a chapter 7 bankruptcy and is still making payments on a house, the debt on the house is not eliminated by the discharge unless the debtor is surrendering or giving up the house. In the event the debtor is surrendering the home and giving it back to the mortgage company, that debt would be discharged or eliminated in the bankruptcy.

Sometimes clients get confused about the difference between a discharge of debts and a dismissal. A dismissal is when the case is thrown out of bankruptcy court and the debtor still owes the debts. A dismissal of the case is usually bad news. A discharge of debts notice from the court is usually good news! The debts have been eliminated.