What Happens to Debts I Incur After I File for Chapter 7 Bankruptcy?

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Chapter 7 bankruptcy gives you a fresh start by discharging (wiping out) most types of debts. With a few exceptions, you can get rid of debts you incurred before you filed for bankruptcy – these are called pre-petition debts. On the other hand, usually you cannot discharge debts you incur after you file for bankruptcy – these are called post-petition debts.

Figuring out which debts are discharged and which you must repay can be tricky because the distinction between pre-petition and post-petition debts is not always clear. Keep reading to learn about the different kinds of post-petition debts in Chapter 7 bankruptcy and how they are treated.

Which Debts Are Discharged in a Chapter 7 Bankruptcy?

Most debts, such as medical bills, credit cards, and payday loans, can be discharged in a Chapter 7 bankruptcy. However, this is not true for all debt. For example, debts like child support, certain student loans, some tax debt, and fines or penalties for violations of the law cannot be discharged. (To learn more, see Debts That Cannot Be Discharged in Bankruptcy.)

Chapter 7 also does not discharge post-petition debts. This means that if you incur new debt after filing for bankruptcy, you'll be on the hook for them after you receive your bankruptcy discharge.

Pre-Petition v. Post-Petition Debts

Which debts are pre-petition and which are post-petition?

To start, look at the date you filed your bankruptcy petition. If you had the debt before the date of your bankruptcy filing, that debt is pre-petition. If you took out a loan, made a credit card charge, or incurred other debt after you filed for bankruptcy, this will be a post-petition debt.

But sometimes this line is not clear. Below are some situations where the line between pre-petition and post-petition debt is not obvious.

Car Loans, Mortgages, and Installment Debts

Many kinds of debt require monthly payments that continue throughout your bankruptcy, such as car loans or mortgages. If the monthly obligations on these debts were incurred before you filed for bankruptcy, they are pre-petition debts and the bankruptcy will discharge your personal liability on them.

Keep in mind, however, that if these debts are secured (meaning the creditor has a lien on the property which guarantees payment of the debt), the bankruptcy discharge will not eliminate the lien. This means that if you stop making payments, the creditor has the right to repossess or foreclose the property after you receive your discharge. In order to keep the property, you have to keep up with the payments. (To learn more about secured debt and how it is treated in Chapter 7 bankruptcy, see Nolo's article Secured Debts in Chapter 7 Bankruptcy.)

Homeowner's and Condominium Association Fees

Whether your bankruptcy will discharge HOA or COA dues and assessments (collectively called assessments) depends on when you incurred them.

Pre-petition assessments. You can discharge your personal liability for HOA or COA assessments if they became due before you filed your bankruptcy petition.

Post-petition assessments. However, you remain personally liable for any dues or assessments that become due after the petition is filed. This is true even if you end up giving up your condo, townhome, or home as part of your bankruptcy case.

Reaffirming a Debt

Sometimes after you file a Chapter 7 bankruptcy, a creditor will try to get you to reaffirm the debt. When you reaffirm a debt, you enter into a new contract with the creditor. (Learn about reaffirming debts in Chapter 7 bankruptcy.)

Because you are creating a new contract, and a new obligation to pay, after you've filed your bankruptcy case, reaffirmed debts are considered to be post-petition debts. This means that your bankruptcy will not discharge your obligation to pay these debts after your bankruptcy is over. If you fail to make payments, the creditor has the right to sue you for the money you owe as well as repossess or foreclose on the property.

Assuming a Lease

If you signed a lease agreement before you filed a Chapter 7 bankruptcy, it's a pre-petition debt. But if you end up assuming the lease in the bankruptcy, and then fail to make payments, it's possible that the court might not discharge your lease payment debt.

What Does It Mean to Assume a Lease?

If you have a lease, such as a car lease, when you file for bankruptcy, the trustee will decide if he or she wants to assume (take over) the lease for the benefit of your creditors. This rarely happens since usually the lease would not result in any money for your creditors. If the trustee doesn't assume the lease, you can do so in order to keep the leased property (such as a car). To learn more, see Leases and Contracts in Chapter 7 Bankruptcy.

What If You Fail to Make Payments Under an Assumed Lease?

What happens if you stop making your lease payments after you assume a lease in bankruptcy? A few courts have held that assuming a lease is the same as reaffirming a debt, which means you'd be on the hook for lease payment debt. But the majority of courts have held otherwise – that assuming a lease is not the same is reaffirming a debt. In those courts, you wouldn't be on the hook for unpaid lease obligations (although the car lease company could repossess your vehicle).

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