District of Rhode Island

A discharge is a court order that forgives a debtor of certain specific debts. The discharge order prohibits a creditor from attempting to collect from a debtor a debt that has been discharged. However, not all debts are dischargeable. Parties can file written requests (adversary complaints) to have the court determine if a debt is dischargeable.

Some unsecured debts are not dischargeable because Congress has determined they are types of debts that should not be discharged because of public policy reasons. These debts are listed in Section 523 of the Bankruptcy Code. 

Examples are:
Spousal and child support obligations; Certain tax debts; Most educational loans; Debts related to injuries or death caused by driving while intoxicated; and Debts arising from fraudulent conduct. 

It is also possible for a debtor to be denied a discharge of all unsecured debts if a debtor has not been honest, available to provide information, or cooperative in the bankruptcy case. These scenarios are listed in Section 727 of the Bankruptcy Code and usually involve the U.S. Trustee, a trustee, or a creditor filing a lawsuit in a chapter 7 bankruptcy case to determine that the debtor should be totally denied a discharge.

Debts that are secured by real or personal property are not dischargeable. For example, a creditor may be able to take property even after a discharge is granted because the debtor has not kept up with payments. Even though the creditor may not collect on the unsecured portion of the debt, the property can still be taken from you (residence, automobile, etc.).

Debtor asks the court to determine if a debt can be discharged -- Some creditors have obtained court judgments, and then filed a "lien" which can be used to sell property of the debtor. In some situations, a debtor may file a motion asking the court to remove such a lien. Also, a debtor may file an adversary proceeding asking the court to rule that other debts are dischargeable.

 A. Secured Debt
A secured debt is a debt that is backed by property. A creditor whose debt is"secured" has a right to take property to satisfy a "secured debt." For example, most homes are burdened by a "secured debt." This means that the lender has the right to take the home if the borrower fails to make payments on the loan. Most people who buy new cars give the lender a "security interest" in the car. This means that the debt is a "secured debt" and that the lender can take the car if the borrower fails to make payments on the car loan.

B. Unsecured Debt
A debt is unsecured if you have simply promised to pay someone a sum of money at a particular time, and you have not pledged any real or personal property as collateral for that debt.

C. Priority Debt
A priority debt is a debt entitled to priority in payment, ahead of most other debts, in a bankruptcy case. A listing of priority debts is given, in general terms, in 11 U.S.C. § 507 of the Bankruptcy Code. Examples of priority debts are claims for domestic support obligations, some taxes, and wage claims of employees. If you have questions deciding which of your debts are entitled to priority status, you should consult an attorney.

D. Administrative Debt
An administrative debt is also a priority debt and is one created when someone provides goods or services to your bankruptcy estate. The best example of an administrative debt is the fees generated by attorneys and other authorized professionals in representing the bankruptcy estate.

An individual debtor must complete TWO DIFFERENT CLASSES to obtain a discharge. The names for these courses are: 1) Credit Counseling; and 2) Personal Financial Management. The courses are different in two ways: (a) When the class must be taken; and (b) What type of individual debtor must take the class. If a bankruptcy case is filed jointly, each spouse must take both courses.

CREDIT COUNSELING, Before Filing For Bankruptcy – The Bankruptcy Code ordinarily requires an individual debtor (not a business debtor) to complete an approved course in Credit Counseling within 180 days before filing a bankruptcy case. See list of providers approved by the U.S. Trustee (link is external). The course can be completed in person, over the internet, or by telephone, and the credit counseling service will provide a certificate that the course was completed.

PERSONAL FINANCIAL MANAGEMENT, Very Soon After Filing for Bankruptcy - In order to obtain a discharge of debts, an individual debtor (not a business debtor) must complete an approved course in Personal Financial Management within 60 days after the 341(a) Meeting of Creditors. See list of providers approved by the U.S. Trustee. (link is external) The course can be completed in person, over the internet, or over the telephone, and the course provider will provide a Certificate of Completion.

Only in a very limited circumstance and with court approval can the case filing fee be waived. For chapter 7 individual cases only, there is a procedure for proceeding In Forma Pauperis if the debtor’s income is less than 150 percent of the official poverty line applicable to your family size and you are unable to pay the fee in installments. If you cannot afford to pay the fee either in full at the time of filing or in installments, then you may request a waiver of the filing fee by completing Form B103B and filing it with the Clerk of Court. A judge will decide whether you have to pay the fee.

Alternatively, an individual debtor (but not a corporation or partnership) who is unable to pay the full fee at the time of filing may, at the time of commencing the case, file an application to pay the fee in installments using official Form B103A. If you file an application to pay in installments, you are required by Local Rule 1006-1(c) to pay 25% of the fee at the time you commence your case, and the remainder of the fee in continued payments of 25% commencing within thirty (30) days of the petition date and every twenty-eight (28) days thereafter.

No. Faxed documents are not accepted for filing.

Attendance at hearings by telephone is generally permitted unless another party to the proceeding objects. The local rule addressing this matter is contained in LBR 9074-1. Individuals wishing to appear at a hearing by telephone must follow the procedure outlined in the local rule. When asking for a telephonic appearance, a party must provide the courtroom deputy with the case number, day and time of hearing, and a contact phone number where the party can be reached. Since many hearings are scheduled at the same time, the party participating by telephone must remain available at the number given until the Court places the call.

Bankruptcy cannot cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:

Eliminate certain rights of “secured” creditors. A “secured” creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally can not keep the collateral unless you continue to pay the debt.

Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, most student loans, court restitution orders, criminal fines, and some taxes.

Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.

Discharge debts that arise after bankruptcy has been filed.