If you are struggling with debt, filing for Chapter 7 bankruptcy can help by eliminating your personal liability for many types of debts (not all debts are wipe out however; those that aren't are called nondischargeable debts). But a Chapter 7 discharge will not wipe out any debts you incur after your filing date (these are referred to as post-petition debts). This means that if you incur any obligations after you file your case, you are on the hook for paying them back. Read on to learn more about which debts are considered post-petition and what happens to them in Chapter 7 bankruptcy.
For more information on which debts you can wipe out with Chapter 7 bankruptcy, see our topic area on Your Debts in Chapter 7 Bankruptcy.
Chapter 7 Bankruptcy Doesn’t Eliminate Post-Petition Debts
If you take out a new debt after filing your Chapter 7 bankruptcy, it will not be part of your discharge. Only debts incurred prior to your filing date can be eliminated in your bankruptcy. This means that you will be on the hook for any post-petition debts you incur after your case is filed.
Which Debts Are Considered Post-Petition in Bankruptcy?
In order to determine whether a particular obligation is a post-petition debt, the court looks at whether you incurred the debt before or after your filing date. If you took out the debt prior to filing your case, you can include it in your bankruptcy (this is called a pre-petition debt).
But if you obtained a loan, charged your credit card, or otherwise incurred a debt after filing your bankruptcy, it will not be included in your discharge and you will remain liable for that obligation.
What About Ongoing Payments on Debts Incurred Before Bankruptcy?
For many types of debt (such as a mortgage or car loan), you are required to make regular ongoing payments each month. As long as you obtained the original loan prior to filing your case, you can discharge the entire debt in your bankruptcy because it is considered a pre-petition debt.
However, be aware that a Chapter 7 bankruptcy discharge typically only eliminates your personal liability for the debt. Creditors that have a secured debt (such as your car lender or mortgage company) retain a lien on your property. This means that they can still foreclose on or repossess the property if you default on the loan after receiving a discharge.
To learn more about how secured debts are treated in bankruptcy, see Secured Debt in Chapter 7 Bankruptcy.
Watch Out for Post-Petition HOA Dues
If you are behind on your homeowners association (HOA) dues and want to surrender your house, you can wipe out your pre-petition arrears by filing for Chapter 7 bankruptcy. But keep in mind that you will be on the hook for any dues that are assessed after you file your case until you are no longer the legal owner of the property. Because a foreclosure or short sale can take many months to complete, filing for bankruptcy too early can leave you liable for a significant amount of post-petition HOA dues.
For more information on what happens to HOA dues assessed after your filing date, see HOA Dues in Chapter 7 Bankruptcy.
Reaffirming a Debt Makes You Liable Again
For secured debts (typically car loans), your lender may ask you to sign a reaffirmation agreement if you want to keep the property. If you reaffirm a pre-petition debt that would otherwise be discharged in your bankruptcy, you will remain personally liable for the obligation after your bankruptcy discharge.
To learn more about the benefits and drawbacks of reaffirming debts, see Reaffirmation Agreements in Chapter 7 Bankruptcy.