List Every Debt in Your Bankruptcy

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List Every Debt in Your Bankruptcy

It can often be difficult to convince clients that that they need to include all of their debts in bankruptcy.  Generally this stems from the fear that if they list a house with a mortgage or a car with a car loan, they will lose their car or home in the bankruptcy proceeding  

The confusion stems from the difference between scheduling a debt and discharging the debt.  Debtors are required to list all their debts; however, debts are not necessarily discharged just because they are listed.  For example, the Bankruptcy Code specifies a number of debts that cannot be discharged in bankruptcy.  Those debts must, however, still be listed on the Schedules of the bankruptcy petition.   

The desire to exclude debts from the schedules is often exacerbated when debtors don’t realize that they can reaffirm debts during their case.  A reaffirmation agreement essentially waives the discharge as to that particular debt and reaffirms the obligation to continue paying on the debt.  Clients are frequently surprised when they learn that they can continue to pay a discharged debt voluntarily if they wish.  Pay the doctor after the case is filed if you wish, but list them in the bankruptcy if you owe money when the case is filed. Sadly many clients have long standing relationships with their credit card issuers and want to keep paying because of loyalty or out of fear of being without plastic. The unfortunate fact is that this loyalty is generally a one way street, as most credit card issuers will cancel the card regardless of whether the debt is listed.

Always list every debt in your bankruptcy regardless of whether you want to maintain that debt after the bankruptcy. 

2008-05-18T18:08:42+00:00
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