When we prepare your bankruptcy petition, we will list every debt you owe. However, some debts will “survive” bankruptcy. Here is an overview.
Examples of Debts that Survive Your Chapter 7 Discharge
Credit card debts where there is a co-signer – your Chapter 7 will eliminate credit card and other unsecured debts as to you, but your Chapter 7 will not eliminate your co-signer’s obligations. Thus, your co-signer’s obligations on your credit card debt will survive your Chapter 7.
Secured debts that you reaffirm – when you reaffirm, you are renewing your personal obligation to pay on your account. This means that after your case is over, you will be liable for reaffirmed debts as if you had never filed bankruptcy. This is why you should be very careful about any decision to reaffirm a car note, furniture, jewelry or real estate. As well, when you reaffirm, your credit report will be impacted – either positively or negatively.
Secured debts that you do not reaffirm – if you choose not to reaffirm a secured debt like a house, car, furniture or jewelry, your Chapter 7 discharge will eliminate your personal liability for that debt. As such, these creditors will no longer report anything about your payment performance because you have no personal liability. The discharge of your personal liability, however, does not cancel any security interest the creditor has against your collateral. Thus, if you choose the “keep and pay” option whereby you do not reaffirm but you keep your house/car/furniture and continue making payments you cannot be sued personally for non-payment but the creditor still has the right to repossess or foreclose against the collateral.
Recent tax debts – tax debts that are not stale will survive bankruptcy. The IRS, State of Georgia or other taxing authority does not need to do anything to establish itself as a priority creditor – those debts simply survive your bankruptcy.
Debts that are designated as “non-dischargeable” under Section 523 of the Bankruptcy Code will survive bankruptcy automatically. This includes child support and alimony, student loans, criminal restitution, homeowner’s association debts.
Examples of Debts that Survive Your Chapter 13 Discharge
Chapter 13 is a payment plan type of bankruptcy and generally you can include in your plan just about every kind of debt, including tax debts, past due child support (if the payee agrees) and student loans. To the extent that your plan does not pay non-dischargeable debts, those debts will survive your bankruptcy.
Mortgage debt – generally your Chapter 13 plan only pays debts that will come due within the next 5 years. Most mortgage loans are 30 year loans so your plan will provide that you pay your ongoing monthly payments for the duration of your plan, and the remaining balance will remain due and payable after your case is discharged.
Student loans – student loans are usually paid directly in a Chapter 13 plan and as such will survive the discharge of your case. If you choose to include your student loan debt in your Chapter 13, the interest that accrues during the term of your plan will not be discharged – you will get a bill for accrued interest after your Chapter 13 closes.
Cosigner’s Obligations – if you choose not to “protect your co-signer” by creating a special class that pays co-signed debts at 100%, your co-signer will be responsible for any remaining balance not paid by you in your Chapter 13. In the case of consumer debts, your co-signer will be “protected” by the bankruptcy stay during the course of your case, but once your case is discharged or dismissed, creditors can again pursue your co-signer.
Unlisted Debt – if you did not include a creditor and that creditor did not have a chance to object to or participate in your Chapter 13 plan, that debt could survive your Chapter 13 discharge.