Not all debts are dischargeable in bankruptcy and the debtor remains personally liable for the payment of such non-discharged debts. Entry of the Discharge will typically not reveal which debts are being discharged and which are not. A perfected lien, arising from a debt which is properly scheduled and discharged in bankruptcy, will not attach to property acquired by debtor subsequent to the discharge, provided such property was not acquired by assets retained from the bankruptcy by the debtor. A perfected lien, properly scheduled but not discharged in bankruptcy, remains a lien on all property acquired during or subsequent to bankruptcy. Liens perfected subsequent to the discharge will attach to all property retained by the debtor following the bankruptcy as well as property acquired by the debtor subsequent to the bankruptcy. In Chapter 7 (liquidation) cases, an inquiry must be made to determine whether such debts have been discharged or continue to be enforceable against the debtor and his subsequently acquired property. Non-discharged liens must be shown as an exception to title.
Under Chapter 7 cases, the filing of a Discharge will effectively forgive the personal liability of the debtor from all scheduled and dischargeable debts arising prior to the commencement of the case. This, however, only pertains to debts which were listed in the debtor’s schedule. Debts not listed in the debtor’s schedule (unscheduled debts) – including those which arose prior to the commencement of the case – would not be considered dischargeable.
The effect of a discharged debt upon entry of the Discharge is that it becomes unenforceable against the debtor personally. The discharge protects the debtor from any attempt at collection or recovery by creditors with respect to the discharged debt.
However, if the discharged was obtained a) through fraud then unknown by the requesting party; b) by failure of the debtor to report certain estate property; or c) by refusal of the debtor to obey lawful order or respond to material questions approved by the court – the Discharge may be revoked. Such request for revocation may be made within one year after the discharge was granted in the case of fraud, or within one year from the date of discharge or the date the case was closed, whichever is later, for other cited reasons. Therefore, prior to insuring title, a review of the bankruptcy file should show that more than one year has elapsed since the date of discharge or the date the case was closed (whichever is later) and that no order revoking the discharge has been granted.