What Is a Certificate of Discharge?

A certificate of discharge is a legal document that states satisfactory completion of an obligation like repaying a debt, paying taxes in full, or completing military service. This document is extremely important, as it provides proof that the holder has no further obligations to meet. It may be necessary to access certain benefits or to sell property that was formerly subject to a lien from a creditor. Certificates of discharge should be stored in a safe place, and it is advisable to keep copies on hand to use in the event of a dispute.

In the case of debt obligations like mortgages, car loans, and student loans, the debtor should receive a certificate of discharge after repaying the loan in full along with any interest and fees. The creditor typically issues this statement within 30 to 60 days. If debtors do not receive legal documents stating that they have met the debt obligation, they should request them.

If a problem arises in the future, such as a computer glitch that causes an ex-creditor to send out a payment notice, the ex-debtor can produce this document to show that the debt is cleared. The certificate of discharge will also be necessary if the former debtor wants to sell the property. With a car loan, for example, borrowers cannot sell the car without the express permission of the lender while the lender holds a lien. The certificate of discharge accompanies the lift of the lien, and allows the owner to file to have the lien removed from the title to make it possible to sell the car.

For tax obligations like property tax and income tax, the certificate of discharge indicates payment in full of taxes and obliges the tax agency to lift any liens placed on the property. A lien will prevent the property owner from selling until the debt is settled and will cloud the title. After paying back taxes in full, the property owner can request a certificate of discharge and have the lien removed.

Members of the military receive discharge documentation when they leave service. The documentation provides information about the circumstances of the discharge, such as a discharge for disability or a dishonorable discharge for conduct unbecoming. This document is necessary to access service benefits like health care for veterans and may also be useful as a job reference to show that the obligation of military service is complete.