The term “discharge of debts” is a legal term that is used to describe the end of a debt holder’s obligation to pay a debt. This happens when a debtor files a bankruptcy petition, goes through the bankruptcy process, and has the debts eliminated or “discharged”.
Types of Discharges in Bankruptcy
When a debtor files a bankruptcy petition, he or she can receive a discharge of both unsecured and secured debts. Unsecured debts, such as credit cards, medical bills, and payday loans, are discharged without any repayment required. Secured debts, such as mortgages and car loans, may require some form of payment to satisfy the debt. This could include surrendering the asset or repaying the balance of the loan.
Consequences of Discharge
A discharge of debts means that the debtor is no longer liable for the balance of the debt. Creditors may not attempt to collect that debt, nor can they take any action to collect on the debt. This means that creditors cannot sue, call, or otherwise take any measures to make the debtor pay the debt. This also includes the creditor reporting the debt to a credit bureau.
Benefits of Discharge
The discharge of debts in bankruptcy can provide debtors with a fresh start. By eliminating the debt, the debtor is no longer weighed down by the burden of high credit card balances and large amounts of monthly payments. This new financial freedom can open new doors for them, enabling them to invest in the future without worrying about crushing debt.
Discharging Student Loans
In most cases, student loans can be discharged in bankruptcy, although the process is more difficult than discharging other types of unsecured debt. Because student loans can be such a large burden for many debtors, they may choose to seek legal counsel to help them better understand the bankruptcy process as it relates to student loans.
Conclusion
The term “discharge (of debts)” is a legal concept that is used to describe the end of a debtor’s obligation to pay a debt. This process, which is available to debtors who file for bankruptcy, can provide relief from high credit card balances and large monthly payments. In some cases, such as with student loans, the process may be more difficult and require additional legal help.