Discharge

 

1.0 Availability

 

A chapter 7 discharge under 11 U.S.C. § 727 is available only to individual debtors. This means that a corporate debtor does not receive a discharge. If the debtor has committed certain acts and an adversary proceeding is brought against him or her, the entire discharge may be denied. In addition, a discharge is not available in a chapter 7 if a discharge has been granted previously in a chapter 7 or 11 within the previous eight years. Thus, such a case should never be filed.  A discharge in chapter 7 is also not available if the debtor has obtained a discharge in a chapter 13 within less than 6 years, unless 100% payment was made on unsecured claims or there was a 70% repayment on unsecured debt and this was purposed in good faith and was the debtor's best effort.

 

Under the new law there are additional restrictions.  First, you must have complete the Financial Management class.  Second, under 727(a)(12) the court must certify that the debtor has not been convicted of (nor is there pending an action for) a securities law violation or intentional injury to an individual in the last 5 years.

 

The issuance of a discharge does not terminate a debtor’s obligations to comply with the directives or requests of a Trustee.  Unfortunately, many individuals do not seem to understand this.  As a result, it is has become necessary for the Trustee to request an extension of the discharge date or a Motion to Compel in every case until compliance occurs.  Please help your clients understand that in the future their case may not be discharged until the debtor (and/or debtor’s counsel) has fully cooperated with the trustee.

 

3.0 Revocation

 

A discharge obtained by fraud may be revoked under section 11 U.S. C. § 723(d) within one year of issuance if the fraud is not discovered until after the discharge is granted. A discharge may  also be revoked within the latter of one year after issuance or the date the case is closed if the debtor acquires property of the estate and fails to report it's acquisition and turn it over to the trustee, or if the debtor refuses to obey any lawful order of the court or to answer a material question where no 5th Amendment privilege applies.