In general, at the conclusion of a bankruptcy, an individual will receive a discharge. People that file for bankruptcy seek protection and relief. The Supreme Court of the United States explained that “a central purpose of the [Bankruptcy] Code is to provide a procedure by which certain insolvent debtors can reorder their affairs, make peace with their creditors, and enjoy a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.” Grogan v. Garner, 498 U.S. 279, 286 (U.S. 1991). The same Supreme Court also stated that bankruptcy protection and benefits are designed for the “honest but unfortunate debtor.” Id.
A bankruptcy discharge eliminates personal liability related to debts. A “debt” is defined under the Bankruptcy Code as “liability on a claim.” The term “claim” means a right to payment or another remedy that gives rise to a right payment. While some debts are not discharged in bankruptcy (certain taxes, student loans, claims for fraud, etc.), the majority of debts are discharged.
The effect of a debtor receiving a discharge is that creditors are prevented from any action or process to collect, recover, or even offset any discharged debt of the debtor. If a creditor does make the decision to attempt to collect on a debt that was discharged the creditor can be subject to a civil contempt case. The debtor may bring an action against the creditor and seek damages for such collection efforts. The damages available may include attorney’s fees, costs, and compensatory damages. Some courts have found that punitive damages are available, while others have found that punitive damages are not appropriate.