QUESTION
What is the difference between eliminating debt and discharging debt for bankruptcy? How?
Asked on Jun 18th, 2015 on Bankruptcy - Michigan
More details to this question:
I was looking at one of the other answers to a bankruptcy question, an attorney said this, "Bankruptcy does not eliminate debt. It discharges the legal obligation to pay on a debt." I do not understand. What is the difference?
6 ANSWERS
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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As a practical matter, there is no difference unless you have a cosigner or it's secured by a car, a house or other property. If you have a cosigner, the cosigner is still liable. If the debt is secured, the lender can repo the car or foreclose on the house.
Answered on Jun 23rd, 2015 at 1:47 PM
No real difference, unless secured.
Answered on Jun 19th, 2015 at 11:06 PM
Bankruptcy Attorney serving Madison, WI
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Richard B. Jacobson & Associates, LLC
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This is actually a subtle, technical, and usually unimportant issue. A discharge in bankruptcy is an Order to all of your creditors prohibiting them from every collecting on a discharged debt. But it does expunge or eliminate the debt, both because that would be false to the actual history of events, and arguable, if the debts were truly eliminated, would prevent the creditor from having the small tax benefit they can get if a claim of theirs is discharged in BR. The difference usually doesn't have any significance for most people.
Answered on Jun 18th, 2015 at 9:38 PM
The distinction will depend on the type of debt that is discharged. If you discharge a credit card, you no longer have the legal obligation to pay on it and the credit card is cancelled. If you discharge a car loan, you no longer HAVE to pay it, but it you DON?T pay it, the lender will repossess the car. So the car loan has been discharged, because you don?t have to pay it, but the car loan isn?t eliminated because you didn?t just get a free car.
Answered on Jun 18th, 2015 at 9:31 PM
Bankruptcy Attorney serving Seattle, WA
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The Law Office of Marc S. Stern
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For all practical purposes they are the same. However, there are legal differences and that becomes important when you discuss liens, mortgages, and other obligations. Some obligations are not dischargeable.
Answered on Jun 18th, 2015 at 9:29 PM
Bankruptcy Attorney serving Livonia, MI
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Charles J. Schneider, P.C.
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The debt still exists for a co-signor and as a lien against the home or car although you cannot be personally be made to pay the debt your co-signor, home or car can be made to pay the debt.
Answered on Jun 18th, 2015 at 2:48 PM