What Debts Do You Still Owe After Bankruptcy?

Filing for Chapter 7 bankruptcy is a way for people overwhelmed with debt to get a fresh start on their finances. A debt discharge under Chapter 7 releases the debtor from personal liability for most debts. However, there are some debts that do not fall into this category. Depending on the circumstances, there are some bills that you must (or should) continue to pay.

The basic Chapter 7 timeline is as follows:

  • Mandatory credit counseling
  • Filing of papers to begin the bankruptcy process
  • Creditors’ meeting held about a month after the papers are filed
  • Mandatory budge counseling within 60 days of the creditors’ meeting
  • 60 days after the creditors’ meeting the court will send a written discharge of your debts

For most debtors the discharge order wiping out debts will be entered automatically. Once the discharge has occurred, creditors cannot initiate or continue any actions against the debtor to collect a discharged debt. This includes telephone calls, letters, and any other personal contact.

The following debts may not be discharged under Chapter 7:

  • Alimony and child support
  • Educational loans made or guaranteed by the government
  • Debts for willful or malicious injuries to another person or another person’s property
  • Debts involving death or personal injury resulting from the debtor’s operation of a motor vehicle while intoxicated
  • Debts for certain criminal restitution orders
  • Debts the debtor did not set forth in the bankruptcy filings to the court
  • Debts owed to certain tax-advantaged retirement plans
  • Debts for certain condominium or cooperative housing fees

It’s worth noting that the debt discharge under a Chapter 13 bankruptcy is slightly broader than Chapter 7. The following debts may be dischargeable under Chapter 13, but not Chapter 7:

  • Debts for willful or malicious injury to property
  • Debts involving property settlements in divorce or separation proceedings

If you would like to discuss your situation with one of our licensed bankruptcy attorneys, our doors are wide open. We offer free consultations to people throughout the state of Oregon, and we also have offices in Vancouver, and Tri-Cities in Washington. To schedule an appointment, send us a message through our contact page.

 

Reaffirmation of Debts: What, When, and Why

Reaffirmation is a way to keep certain assets during a bankruptcy that you might otherwise have to forfeit.  A Chapter 7 discharge will wipe out your personal liability for dischargeable debts (including mortgages and auto loans). However, if you are current on the monthly payments and want to keep the item the creditors will routinely forward a new agreement with the original terms (or sometimes even slightly better terms) for you to sign thus reaffirming those terms in a new contract.

When you finance the purchase of a home or a car the lender will have a lien on the house or car (it is their collateral for the loan).  Under a Chapter 7 debt discharge scenario, the lien remains attached to the collateral, and the creditor will still have the right to foreclose or repossess if you don’t make your payments. Debts like these (where your property can be held until the loan is repaid) are called secured debts.

When you reaffirm a secured debt, you are in essence signing a new agreement that reaffirms your personal liability on the loan. In other words, you are signing away your discharge rights on the debt you are reaffirming. This is a serious commitment and one that you should consider carefully. It is advisable to consult with your bankruptcy attorney before taking this step. Keep in mind that a reaffirmation agreement must be filed within 60 days after the meeting with the bankruptcy trustee.

Here are some reasons why you might want to reaffirm a debt:

  • Rebuild your credit. When you reaffirm a debt, your payments on that loan will continue to be reported to the credit reporting agencies by the lender; this will aid you in the credit rebuilding process.
  • Opportunity to renegotiate with lender for more favorable loan terms since the reaffirmation constitutes a new contract.
  • Prevent repossession or foreclosure when you want to continue making payments on the loan.

5 Advantages to Filing for Bankruptcy

Declaring bankruptcy is a means and a right to get a fresh financial start. It allows individuals or businesses to resolve financial issues, rebuild credit, put a stop to aggressive debt collecting actions, and discharge certain kinds of debt that have become unmanageable. Here are 5 advantages to declaring bankruptcy.

  1. Address missed payments, defaults, repossessions, and lawsuits that are keeping your credit score down. While bankruptcy will also hurt your credit score, it is often an easier and quicker way to rebuild your credit score than to try and deal with each creditor individually over a number of years.
  2. Put a stop to creditors’ aggressive debt collecting practices like harassing phone calls, dunning letters, repossessions, and declined transactions. Even in the case of student loans, which are not dischargeable, at least you can prevent future aggressive collecting actions.
  3. You’re wiping the slate clean. The opportunity to get a fresh financial start should not be underestimated. While bankruptcy can have its own stresses, there is a great deal of peace of mind and relief to be gained from declaring bankruptcy. And keep in mind that you will probably end up keeping all of your personal possessions, either because of exemptions or lack of interest from creditors.
  4. While being in a disastrous financial situation often becomes all too public, bankruptcy is something you can keep fairly private. Friends, co-workers, and even your family do not have to know that you have filed for bankruptcy (unless you owe them money as well). The only time your bankruptcy will show up is on a credit history report, and as stated above, that can sometimes make a better statement to a lender than being stuck in a financial quagmire. And even if your employer was to find out, it is illegal under bankruptcy laws for an employer to discriminate based on bankruptcy.
  5. Debt discharge. This is an obvious one, but it’s huge. All of the (unsecured) debt that has been making your life miserable will disappear.