What Debts Must You Pay During Chapter 7 Bankruptcy?

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a useful tool to get out from under different kinds of dischargeable debts. Credit cards, medical bills, and personal loans all fall under debt that can be discharged as long as you meet specific Chapter 7 income requirements. It is important to note that while a Chapter 7 bankruptcy can get rid of a lot of your debts, there will still be debt you are responsible for paying during and after the bankruptcy process. It can be confusing to determine what you are still responsible for during and after bankruptcy. Here, we look at the debts you must keep paying even while filing for Chapter 7 bankruptcy.

Post-Petition Debt:

You will likely still receive bills while your bankruptcy case is pending. If the debt in question was incurred after you filed for bankruptcy, it is not included in your case and you will be responsible for paying it. These debts are called “post-petition” debts and they typically include child support, alimony, utilities, rent, homeowner’s association (HOA) fees, insurance, and most taxes. The court will determine on a case by case basis if any of these kinds of debts included in the filing will qualify for a discharge. Whereas most utility bills incurred before filing are dischargeable, child support payments are not and you will continue to owe on your outstanding balance after the case for these debts.

Secured Debt:

Secured debt typically occurs with the use of credit purchase of expensive property. In these cases, the lender typically requires collateral to use in case you cannot meet required payments on the loan. A mortgage or car loan are common examples of secured debt. Whether or not you should continue to make payments on these loans depends on if you plan to keep the property associated with the loans. If you give the property used for collateral back to the lender, then the loan will likely be discharged with your bankruptcy case.

If you want to keep the property in question, you should keep making regular payments through your bankruptcy and after. If you do not continue to make payments, even if you are in the middle of bankruptcy proceedings, the lender could use their rights to take back the property through foreclosure or repossession. There will be a temporary stay (more on that below) to prevent your lenders from taking legal action during bankruptcy proceedings, but lenders can file a motion to proceed even during a bankruptcy. Regardless, once the bankruptcy case has closed, the lender is free to pursue their legal rights to repossess the property if you have not kept up with payments.

Payment Responsibility:

In the event you cannot discharge all of your debt, you will still get a brief payment break on the debts that you cannot discharge, like student loans, taxes, and court fines. During the automatic stay, creditors will not be able to attempt to collect on your debts. Once the temporary stay has lifted, however, you will be legally obligated to resume payments on all non-dischargeable debts. How much you will owe on these debts post-bankruptcy depends on whether or not you plan to or are able to keep the property associated with the debt.

Filing for bankruptcy can be confusing and intimidating. At Veitengruber Law, we have years of experience working with clients throughout bankruptcy filings. We can help demystify the process so you can make confident and informed decisions about your financial future. Our experienced legal team will guide you through the legal ins and outs of a bankruptcy so you know exactly what to expect.

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