As a bankruptcy attorney I spend a lot of time explaining how my clients’ lives will change after they file bankruptcy. But what happens once a bankruptcy case is completed? It depends on whether the case was dismissed early or was successfully completed. Successfully completing a bankruptcy case usually means that the debtor has received a discharge order.
The discharge order is a court order signed by a judge stating that the debtor is no longer liable for the debts discharged in the bankruptcy case. In most cases creditors understand that a discharge order means that they can’t collect their claim from the debtor any longer. However, every once in a while a creditor comes along that is clueless about bankruptcy and sues the debtor. When this happens it is important to understand that you can’t simply ignore the lawsuit. An answer must be filed that puts the discharge order forth as an affirmative defense. If an answer is not filed or an answer is filed but doesn’t assert the bankruptcy order as a defense, then the lawsuit may continue. The discharge order only protects you if you use it!
If a bankruptcy case is dismissed early without obtaining a discharge order then the debtor is liable for debts under the original contract terms, as if the case had never been filed. This means that interest will be recalculated to take into account the time the account was not accruing interest as a result of the bankruptcy case. In addition, once the case is dismissed there is no automatic stay protection, so the creditor can collect in any way allowed by federal and state law.
The bottom line is that it is important to make sure that if you file bankruptcy, that you successfully complete the case and receive your discharge. In addition, if you do get sued after completing your case then you must take steps to protect yourself. You cannot simply ignore the problem and hope it goes away.