When you receive your discharge, an injunction goes into effect by operation of law. This injunction, called the Discharge Injunction, effectively extends the automatic stay and gives you many of the same protections that were given to you by the automatic bankruptcy stay. The automatic stay terminates once you receive a discharge. The discharge injunction picks up where the automatic stay left off and extends many of the same protections. With respect to all of your debts that have been discharged by your discharge, the Discharge Injunction prohibits creditors from attempting to hold you personally liable for a debt. Where applicable, the Discharge Injunction will stop harassing phone calls from creditors and debt collectors and will stop other types of creditor action attempting to hold you personally liable for a debt.
Discharge Injunction for Married Couples
The Discharge Injunction offers important protections for married persons. If you are married and are filing alone without your husband or wife, then once you obtain a discharge of your debts, the discharge Injunction will protect the community property of your spouse against claims of creditors arising from community debts. Married couples filing bankruptcy should consult with an attorney as to whether the filing by one spouse will be sufficient to protect both spouses. Married couples may find that a filing by just one of you may give both of you all the protection that you need from your creditors.
Lender's Lien Rights Survive Discharge
The Discharge Injunction only prohibits your creditors from suing you personally. It does not prevent them from exercising their rights under a security interest or lien, such as a deed of trust against your home. In other words, bankruptcy eliminates your personal liability for a debt but does not automatically wipe out your lender's lien. To wipe out a lien, you have to take additional steps, such as lien stripping to erase a second mortgage or equity line encumbering your home.
To illustrate, when you take out a home loan, you do two important things: (1) sign a promissory note evidencing your home loan debt and agreeing to be personal liable for payment of the loan; and (2) sign a deed of trust giving your lender a security interest (a lien) against your home. When you obtain a discharge, your personal liability for the loan is eliminated. The Discharge Injunction then prohibits your lender from suing you personally to collect the loan debt. However, your lender still retains its lien and can foreclose if payments are not timely made on the loan.
Under appropriate circumstances, your lender's lien can be physically removed from your home or other property by doing a lien strip of the lien. Your attorney can explain your options and assess whether the remedy of lien stripping is available in your situation.