Paying Discharged Debts

October 1, 2012

When a debt is discharged during bankruptcy, it does not “vanish.” The bankruptcy laws do not “erase” a debt. The discharge is an injunction against the individual’s creditor that prohibits the collection of the debt from the individual. The debt still exists; the creditor cannot collect from the bankruptcy debtor.

In some cases a debtor may want to voluntarily repay a debt that is discharged in bankruptcy. This situation occurred in a very public way in Connecticut. U.S. Senate candidate Linda McMahon recently announced that she and her husband Vince will repay creditors discharged in their 1976 bankruptcy. Linda and Vince McMahon are synonymous with professional wrestling and the WWF and WWE. After their personal bankruptcy, the McMahons spearheaded the development of professional wrestling from regionalized entertainment to an international stage. Their promotion of professional wrestling has made them wealthy. The McMahons have been listed in past issues of Forbes magazine as among the nation’s richest.

The Bankruptcy Code provides, “Nothing contained in. . . this section prevents a debtor from voluntarily repaying any debt.” 11 U.S.C. § 524(f). Any debt that is discharged during bankruptcy can be voluntarily repaid. Creditors are still under the court’s prohibition against taking action to collect, but are free to receive payments made voluntarily by the debtor. The term “voluntarily” means free from creditor influence or inducement. A creditor may not send a bill or take any collection action against you.

Voluntary payments do not invalidate the discharge order and do not create a new legal obligation. “Debtors who file under [Chapter 7] can dispose of their post-petition earnings as they choose, including voluntary repayment of debts otherwise dischargeable in bankruptcy.” In re Hellums, 772 F.2d 379, 381 (7th Cir. 1985). You can pay back whomever you wish.

While making voluntary payments after bankruptcy is not prohibited, it is unusual. It is best to receive experienced legal advice from an attorney before repaying a discharged debt. Speak with your bankruptcy attorney and discuss your desire to repay your debts. Your attorney can ensure that your good intentions are not punished.
 

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