Can I repay a family member or relative when my Chapter 7 bankruptcy is over?
You can voluntarily repay money you owe to family members and friends after you receive your Chapter 7 discharge.
I owe my aunt a few thousand dollars. I recently filed for bankruptcy and am still waiting for my discharge. I was embarrassed to do so, but I listed the money I owe to my aunt on the bankruptcy papers. When I get my bankruptcy discharge, the debt I owe to my aunt will be wiped out. But I still want to pay her. If I repay her, will she or I get in trouble with the bankruptcy court? I’ve heard you cannot “prefer” one creditor over another.
Yes, you can repay your aunt. It’s best to do so after you receive your bankruptcy discharge.
The Bankruptcy Discharge Releases Your Obligation to Pay
When a debt is discharged in bankruptcy, it means you no longer have a legal obligation to pay it. It also means the creditor cannot take any steps to try to collect it. However, you are certainly free to voluntarily repay the debt.
You are correct that bankruptcy does not allow you to prefer one creditor over another. You would not be permitted to repay your aunt right before you filed for bankruptcy, because then she would get more than her share of the money available to creditors. (Learn more about preference payments in bankruptcy.) However, once your bankruptcy case is over you can do what you like. Neither the bankruptcy trustee nor the court has any interest in or control over your property and debts.
Repaying Debts During Bankruptcy
The income you earn after you’ve filed your bankruptcy case is not part of the bankruptcy estate. So if you had to, you could use some of this money to repay your aunt. However, it’s safest to wait until you receive your discharge before you repay any discharged debts.