Tag Archive: fresh start


This discharge entered by the court in a bankruptcy case is the golden rod of every bankruptcy – the thing every debtor needs and/or wants in order to get their life back on track and enjoy their fresh start.  The discharge order is the court order that tells your creditors that they are prohibited by federal law from ever attempting to collect discharged debt from you again.  Getting a discharge is different from having the case dismissed – in fact – having the case dismissed is actually a bad thing.  It means that you did not get your discharge, and it may affect the automatic stay in a future filing.  So, to recap my point up to here: Dismissal is bad – discharge is good.  It is NOT however, the end all-be all of your case.

See, Congress actually had a little bit of foresight when the figured out this system:  They realized that the discharge is the order that protects the debtor, and they realized that the asset administration of the case can take quite some time. Under normal circumstances it would neither be fair, nor good for the debtor to have to wait for the trustee to finish up the case administration before a discharge is entered.

If you remember your Chapter 7 basics, a Chapter 7 bankruptcy is a ‘liquidation bankruptcy’ and it is the trustee’s job to review your schedules and statements to determine whether you have any assets that are not protected by law that he has to liquidate in order to pay your creditors.  Well, you can imagine that while that may be easy-breezy for most Chapter 7 debtors – it can take quite some time for others, and the same rules apply to all.  Furthermore, as part of the asset administration in your case, the trustee can keep the case open to wait for your tax return to be filed.

This is why there are two tracks and here they are:

  1. Discharge Track: If you fulfill all requirements to be eligible for a discharge (in short: pre-filing counseling, eligible for Chapter 7, post-filing counseling, attendance of 341 Meeting of Creditors) then the court will enter your discharge approximately 90 days after your creditors meeting has been concluded.
  2. Case Administration Track: Your trustee can make a determination that there are not assets in your case and file a “Report of No Distribution.”  If so, your case will be closed by the court shortly after the discharge has been entered.  However, if the trustee does not file this report, and he is working on liquidating your assets, or working on figuring out whether there are any assets, then you case will likely stay open for a little while longer after the discharge has been entered.  He may even ask you for some additional information during that time, and it is your duty to cooperate with the trustee.

The main things to keep in mind during case administration process are (a) the trustee has the power to ask the court to revoke your discharge if you are not cooperating with him; and (b) don’t forget the big picture:  Yes it may be temporarily painful to give up most or all of your tax refund, or to pay for the privilege of keeping a non-protected asset – but that is usually a small price to pay when compared to the tens or hundreds of thousands of $$$ you are discharging.

In summary, once your discharge is entered the main hurdles have been met, and the main goal has been reached, but your case is not yet closed.  The court will enter a separate case closed order at a later time and only then is your case truly and unequivocally “done.”

  The discharge, in general, operates as an injunction against any act to collect an obligation of the debtor that existed on or before the date of filing of this case, with some exceptions. The discharge does not enjoin the collection of taxes not less than three years old on the date of filing for which returns have been filed, other taxes of a shorter period, the collection of student loans for which no finding of hardship has been made, or debts as to which the court has made an order of non-dischargeability.

In plain English, it is a court order that prevents all of your creditors from ever attempting to collect the debt you owed before filing – no one can ever ask you to pay on that debt again, and if they do, they can be sanctioned.  Now, there are some exceptions, as noted above.  The most common ones are most tax debts, and pretty much any student loan debts.  Finally, any debts that you reaffirmed are excepted from the discharge.  Orders of non-dischargeability as mentioned above are fairly rare – such orders typically happen when a creditor can show that you incurred a debt with the intent to discharge the debt. 

In short, the discharge is the key to your fresh start.  It frees you from the burden of debt and allows you to focus on rebuilding your financial future.

After determining your household income, and realizing that you ‘fail’ the means test because, unbelievably, you make ‘too much money’, not all hope is lost.  There is a very important second step to the means test, that may still allow you to get a fresh start in a Chapter 7 bankruptcy, rather than struggling through a Chapter 13 repayment plan.  In this second step, we take your gross monthly income, as determined during the first step, and take out certain expenses. For one, we get to deduct all the taxes that you pay, so we finally get to work with net income.  We then deduct living expenses.  Absent unusual circumstances,  we are unfortunately limited to what the IRS determines to be the average monthly expense for a household of your size for food, housing, transportation etc.  but sometimes special circumstance exist, and we can show the court why you need to have an additional monthly expense allowance for one of the categories. 

After we take these statutorily determined expenses, we then look at your other monthly expenses.  For example, do you have children in school under the age of 18?  Deduct $137.50 per child.  Do you have life insurance? Deduct your life insurance.  Do you pay real estate taxes?  Deduct your real estate taxes.  There are quite a few more of these categories – most of them a bit difficult to decipher even for an attorney, but they are there, and an experience attorney will get you every deduction you qualify for.  This is another reason why you should not rely on online forms to complete the means test for you, or document preparers.  Most of those guys will run the basic test, maybe check the set deduction, and then send you down the path to a Chapter 13 without even checking for any other deductions that are available for you.   Finally, if you have any secured debts (think house with a mortgage, car with a car loan) or any tax debts we also get to deduct a set monthly amount for your expenses connected to that. 

Once all that is said and done many potential clients that thought they had not options other than a Chapter 13, all of the sudden have all sorts of options… They can get their fresh start right away – stop worrying, and move on with their lives, and all because someone actually took the time to calculate their eligibility.  Or if their budget allows, they can choose to be in a Chapter 13, but how the means test works there is quite another story.  If you think you might need to file for bankruptcy relief, and you want to find out more about it, keep on reading, do your research, and then call a lawyer.

Are thoughts like this going through your head?  What about “Which bills should I pay this month…?” or “Why won’t they stop calling me?”  If you find yourself in a financial situation that is worse than what you had hoped for in this stage of your life, and for whatever reason you find that your debts are eating you alive, bankruptcy just may be the answer to your questions. 

Here is a little step-by-step guide to follow after you have asked yourself the above question:

  1. Take a deep breath… there are options out there – and one will be right for you. Remember – sticking you head in the sand, and ignoring the problems around you never works.
  2. Start doing some research.   (If you are reading this, you are on the right track).
  3. Take another deep breath.  Come to the realization that there is A LOT of information out there – not all of it from particularly good sources, not all of it correct, and most likely none of it fitting your particular situation.
  4. Begin researching bankruptcy attorneys in your state. 

Yes, attorneys.  I realize there is a whole variety of options out there, from document preparers, to debt relief organizations, but the bottom line NEVER CHANGES: Only an attorney can give you legal advice – only an attorney can help you realize the full picture.  Also, on a side note, the guys with the sign on the side of the highway advertising $200 bankruptcies – they are, typically, document preparers.  You know what a document preparer does?  He fills out your forms, based on the information you give him.  He cannot give you legal advice, he is not qualified to give you legal advice, and guess what else?  Once he is done filling out the forms, he’ll most likely hand them back to you and send you on your merry way to figure out not only how to maneuver the bankruptcy system, all on your own. 

So, back to researching your attorneys.  Even though this rarely is the reality of things, but the price should be your least important factor in determining whether to hire an attorney.  Arizona bankruptcy attorneys all know what the other charges, in a round about way, we all have our own ways of figuring out what is fair for you, and keeps our bills paid.  The most important factor is ‘are you comfortable with the person that proposes to represent you?’.  Don’t get me wrong, you’re not going to go steady with your attorney, but you will have to work closely with him or her in preparing and planning your way to a fresh start.  Your attorney is your advocate, counselor and legal representative, and if you just don’t see eye to eye with him or her, it might not be the right fit for either one of you.

If you think you are comfortable going from an intake clerk to a paralegal – kind of passing the attorney in the hallway somewhere in between there, and having the paralegal be your main point of contact – by all means, go with one of the big guys.  Their attorneys are highly competent, and on the couple of occasions you get to talk to one of them, you’ll probably like him or her.  If, on the other hand you would prefer to have your actual attorney walk you through the process, with her support staff doing exactly that – supporting her in the data gathering and logistics, then you may be better of with a smaller firm. 

Aside from that, working style also matters greatly.  Take me for example: If you do not have email, or you only check it about once a month to see what the grandkids are up to – then I’m probably not the right fit for you.  On the other hand, if you value getting your questions answered quickly, both in writing, and if needed over the phone, then I might just be your gal.

To sum up, there are a multitude of options out there.  Even though it may feel like it right now – the world is not in fact collapsing around you.  Always remember, knowledge is power, and getting this knowledge from a licensed attorney will empower you to take your life back, and get your fresh start.