When a debtor files for Chapter 7 bankruptcy, many of his/her debts may be discharged by the court. There are a few exceptions to this, but mostly it means that creditors may take no further actions to collect on the debt.

There are a few reasons why you may not qualify to have some debts discharged. According to the U.S. government, these exceptions include:

  • failure to produce adequate financial records
  • failure to adequately explain lost assets
  • commission of a bankruptcy-related crime (such as perjury)
  • failure to abide by a bankruptcy court ruling
  • fraudulently transfer, conceal or destroy property that would otherwise be liquidated
  • failure to complete a court-ordered instructional course in financial management#

While these exceptions may keep you from fully discharging your debt, openness, honesty and a good attorney can help protect you throughout the process.

A debtor may also file for a reaffirmation of certain debts, especially if they are necessary to quality of life.

What is reaffirmation?

When a debtor reaffirms a debt, it means that he or she is taking responsibility for that debt and agreeing to make payments. This is mostly a necessity-based measure employed with an individual cannot risk losing a certain possession or asset.

Consider the case of Todd, an individual filing for Chapter 7 bankruptcy. He can no longer handle the scope of his debt and is in the process of starting over by discharging certain debts. However, he drives to work every day and can’t risk the possibility of losing his car. Todd’s income may not meet the requirements for his monthly payments (the court refers to this as “undue hardship.”)

Even if this is the case, the court may approve Todd’s request to reaffirm the debt in order to keep his car. He agrees to continue to make payments, and his creditors agree not to repossess his car. It’s a best-interest issue that is decided individually by the court.

Nothing is as important as knowing your rights. Todd’s precarious situation could have gone wrong had he not been represented by a professional. Give us a call today to learn yours.