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What happens when a debt is discharged?

People who are faced with overwhelming debt may be good candidates for Chapter 7 bankruptcy protection. Filing Chapter 7 bankruptcy is a way for a consumer to have most debts discharged, and emerge with a fresh financial start. Many Ohio consumers, however, might not understand exactly what it means to have debts discharged.

A bankruptcy discharge essentially releases a consumer from all personal liability to a certain debt. This means that once a debt is discharged, the debtor is not legally required to pay that debt. Bankruptcy discharges are permanent, and creditors are not allowed to attempt to collect discharged debts - it is illegal for creditors to call or otherwise contact consumers in attempts to collect such debts. It is important that Cincinnati consumers are aware of this, because in some cases creditors break the law and go after consumers who have discharged debts.

When consumers, who have discharged debts in bankruptcy, are being contacted by creditors about discharged debts they should seek legal advice.

A bankruptcy judge recently ordered Bank of America to pay $10,000 for every month that it continues to contact one couple about a loan they discharged in bankruptcy.

The couple was relieved of all obligations to pay their $227,000 home loan when they filed Chapter 7 bankruptcy, but Bank of America apparently continued to hassle the couple about the debt. Such action is not legal.

Unfortunately, that case is not an isolated one. As we discussed in this Cincinnati Bankruptcy Blog last month, banks are continuing to use abusive, deceptive tactics, particularly when it comes to foreclosure efforts.

Those who are in need of debt relief in Ohio should not be completely discouraged by this news. It is often possible to successfully obtain debt relief through bankruptcy. However, if you are being harassed by creditors - before or after seeking bankruptcy relief - it may be wise to talk to a bankruptcy attorney about protecting your rights.

Source: Wall Street Journal, "Bankruptcy Judge Sends a Message to Bank of America," Peg Brickley, Oct. 4, 2013

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