Creditors You Intend To Pay

June 18, 2010

Almost all debtors in bankruptcy are honest people who have experienced great financial difficulty.  One of the most common questions asked by debtors is, “Do I need to list a creditor I intend to repay?” 

The answer to this question is very simple: “Yes!”  You must list all of your debts and each of your creditors, even those you intend to repay.  There are two ways to repay a debt after bankruptcy.  The first is by voluntary payment.  The second is with a reaffirmation agreement. 

Voluntary payments made after your bankruptcy discharge neither create a new legal obligation nor invalidate the discharge order.  Any payment you make on a discharged debt is the result of a moral obligation since the legal obligation to pay the debt has been discharged by the bankruptcy court.  The creditor is still prohibited from contacting you or trying to collect on the debt. 

A reaffirmation agreement is a new contract between you and your creditor.  It is fully enforceable after the bankruptcy, so if you default on the obligation the creditor can sue you and repossess any property securing the agreement.  Reaffirmation agreements are commonly used to continue auto and home loans.  The debtor agrees to continue the legal obligation to pay the loan, and the lender agrees to not repossess the collateral.   

Reaffirmation agreements are only available to Chapter 7 debtors and the agreement must be executed before the bankruptcy discharge is entered.  The debtor can revoke the agreement with 60 days after the agreement is signed.  The Bankruptcy Code requires that the debtor demonstrate that the paying a reaffirmed debt will not create an undue hardship for the debtor or the debtor’s family.  While a reaffirmation agreement can be used for credit card agreements and other unsecured loans, bankruptcy courts are reluctant to approve these agreements without exceptional circumstances. 

You are free to continue to pay a debt after your bankruptcy.  Congress specified in the Bankruptcy Code that “Nothing contained in. . . this section prevents a debtor from voluntarily repaying any debt.”  There are several legal options for repaying a debt after bankruptcy, as well as several avenues for debt restructuring.  Discuss your specific situation with your bankruptcy attorney and discover your options.  

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