We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Law

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is Discharge Debt?

By Christy Bieber
Updated: May 17, 2024
Views: 9,120
Share

Discharge debt refers to debt that has been forgiven, or discharged. This commonly occurs during bankruptcy or the related equivalent. Some debt may also be discharged in other circumstances, such as through negotiation with the creditor.

When an individual borrows money, he becomes a debtor. He is legally obligated to pay back the debts that he or she incurs. The creditor is entitled, within the rules of the collection laws of the area, to take appropriate steps to collect on the debt.

Sometimes, however, individuals get in over their heads in debt. As a result, nearly every country has created some type of provision which allows an individual to discharge debt that he or she has no possible hope of reasonably paying back. The exact rules and methods in which an individual can discharge debt vary by country.

In the United States, for example, an individual can discharge debt through filing bankruptcy. Only certain debts can be discharged, such as unsecured credit card debt and other unsecured loans. Student loan debt and debt owed to the Internal Revenue Service (IRS) cannot be discharged in most standard bankruptcies, except in cases of extreme undue hardship.

Bankruptcy, or a related method of discharging debt, exists in many countries. In Australia, the Bankruptcy Act 1966 gave individuals the right to discharge debt, but not companies. In Canada, bankruptcy applies to individuals and corporations. In Switzerland, bankruptcy can be declared by the court as a consequence of a person's insolvency, but a person cannot simply declare bankruptcy.

In bankruptcy proceedings, an individual generally lists debts that are dischargeable under the law. The creditors may have an opportunity to speak in front of the court or tribunal in which the bankruptcy proceedings take place. The court then has one of several options, depending on the laws and the situation of the debtor.

The court may put the individual on a payment plan. This occurs under Chapter 13 bankruptcies in the United States. If the individual is put on a payment plan, some or all debts may be discharged but the individual will also be required to pay back a portion of the debts according to a court-mandated repayment plan.

Alternatively, the court may simply discharge the debts. This occurs under Chapter 7 bankruptcy. When this occurs, the court declares that the debtor no longer has to pay back any amount of the debt, and that the creditor is unable to collect the discharged debt.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Editors' Picks

Discussion Comments
Share
https://www.wisegeek.net/what-is-discharge-debt.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.