What Debts Should I Continue to Pay During My Chapter 7 Bankruptcy Case?

What Debts Should I Continue to Pay During My Chapter 7 Bankruptcy Case?

A Chapter 7 bankruptcy only discharges eligible debts that you owed at the time that you filed your bankruptcy petition. Those debts are called pre-petition debts. Anything that you owe after you filed—called pre-petition debts—are not included in your bankruptcy and remain your responsibility, with some exceptions.

What You Should Pay

Some debts that you should continue to pay after filing a Chapter 7 include:

  • contractual payments on secured debts for property you wish to keep (mortgages, car loans, etc.)

  • student loans

  • current utilities

  • current rent and lease payments

  • most taxes, and

  • insurance

A Chapter 7 bankruptcy normally does not change the agreement that you have with your secured creditors. If you are behind on, for instance, a mortgage loan at the time you file, you will need to find a way to get contractually current or reach a separate agreement with that creditor if you want to keep the house. If you go into a Chapter 7 with a mortgage arrearage, you may be better off:

  • converting to Chapter 13, or

  • filing a subsequent Chapter 13 after the Chapter 7 discharge (commonly called a “Chapter 20”).

For more information on how a Chapter 20 works, read this article on Nolo: www.nolo.com/legal-encyclopedia/chapter-20-bankruptcy.html

Redemption

If you have a car loan and the car is worth less than what is owed, you should consider redeeming the car in Chapter 7 rather than continue to keep making the regular payments. For more information, read this article on Nolo: www.nolo.com/legal-encyclopedia/keeping-your-car-chapter-7-bankruptcy-through-redemption.html

What You Should Not Pay

Any debt that became due and payable at the time you filed bankruptcy should not be paid after you filed Chapter 7. Those debts include:

  • secured debts on property that you do not want to keep

  • unsecured, personal loans

  • credit cards

  • past due balances for electricity, heating, phone and other utilities

  • medical bills

Unscheduled Debts

If you forget or intentionally leave a creditor out of your schedules, and the creditor does no know about the bankruptcy, then that debt might not be discharged. If that debt is not discharged, then you may still be responsible for paying it. Depending on where you filed bankruptcy, you might not have to repay that debt if you filed a “no-asset” Chapter 7 bankruptcy. For more information, read (insert link to article about omitted debts in bankruptcy schedules)

Reaffirmed Debts

If you and a creditor entered into a reaffirmation agreement, then that debt will not be discharged. You will be legally obligated to pay it.



Voluntary Payments

You may decide to keep certain debts even though they would be discharged in your bankruptcy. Those include loans from friends and relatives, or medical bills from doctors or dentists that you wish to continue seeing after you file bankruptcy. You can make voluntary payments to these creditors, but you are not legally obligated to do so.

Exception

If you make voluntary payments using bankruptcy assets, you might run into trouble.

Example: At the time you filed bankruptcy, you had a tax refund coming in an amount that was over your allowed exemptions. The trustee would be allowed to seize the amount of the refund that exceeds the available exemptions. If you intend to use the entire refund to pay off a loan to your mother, the trustee could seek to get that money back as a preferential transfer, or may take other action against you for taking bankruptcy assets.

If you choose to make voluntary payments to a creditor on a discharged debt, you should use post-petition income to do so. You should also wait until after the bankruptcy is discharged before making the voluntary debt repayments.



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