Can a Creditor Sue After Bankruptcy Discharge?

The short answer: generally no. But there are exceptions you need to know about.

The General Rule: No

Once you receive a bankruptcy discharge, the Section 524 discharge injunction permanently bars creditors from filing a lawsuit to collect any discharged debt. This is a federal court order that applies nationwide. It does not expire.

A creditor who files a lawsuit on a discharged debt is in contempt of court and can be sanctioned, ordered to pay damages, and required to pay your attorney fees.

Exceptions: Nondischargeable Debts

The discharge injunction only applies to debts that were actually discharged. Certain debts survive bankruptcy and are not affected by the discharge:

• Student loans (unless undue hardship was proven in an adversary proceeding)
• Recent taxes (tax debts that do not meet the specific timing rules)
• Child support and alimony
• Debts obtained by fraud (if the creditor filed a timely adversary proceeding and the court ruled the debt nondischargeable)
• DUI-related debts
• Criminal fines and restitution
• Debts not listed in the schedules (in some circumstances -- see 523a.org)

Creditors can sue on nondischargeable debts because those debts were never eliminated by the discharge.

What If You Are Sued on a Discharged Debt?

1. Do not ignore it. Even though the lawsuit is improper, failing to respond can result in a default judgment.
2. Get a copy of your discharge order. You can obtain it from PACER or the bankruptcy court clerk.
3. Respond to the lawsuit. File an answer asserting the discharge as a defense. Attach a copy of your discharge order.
4. File a motion for contempt. In your bankruptcy court, file a motion for contempt against the creditor for violating the discharge injunction.
5. Consider hiring an attorney. Many consumer bankruptcy attorneys handle discharge violation cases on contingency. The court can order the creditor to pay your attorney fees.

Liens Survive Discharge

An important distinction: the discharge eliminates your personal liability for a debt, but it does not eliminate liens on property. If a creditor has a valid lien on your home or vehicle, the lien survives the discharge. The creditor cannot sue you personally for the debt, but they can enforce the lien against the property (for example, by foreclosing on the home).

See scope of the discharge injunction for more on this distinction.

Cross-References

• 523a.org -- Nondischargeable debts under Section 523(a)
• dischargeinjunction.com
• nondischargeable.org
• automaticstay.org