May I Pay Any of My Debts After Bankruptcy?

Yes.

You are permitted to pay one or more creditors after you obtain a bankruptcy discharge.

If a particular debt is discharged (forgiven) in bankruptcy, you may still voluntarily repay it.

Example1 - Family Loan:

A person borrowed money from a parent and wants to pay them back even though the debt is discharged in bankruptcy. Such person may pay back such loan.

Note: Immediately seek legal counsel from a bankruptcy lawyer if you desire to repay (or have been repaying) a loan to a friend, relative or family member BEFORE filing for bankruptcy protection to avoid what is called a "preferential debt repayment."

Example 2 - Secured Debts:

A person desires to keep their home. The bankruptcy discharge:

(1) Eliminates and wipes out your personal liability for the mortgage; but

(2) Does not eliminate the security interest (lien).

Therefore, after a bankruptcy discharge, the mortgage lender still has its rights in the property, including the right to foreclose, if you breach the loan agreement by failing to meet your payment obligations. Therefore, if you desire to keep your home, you will, in most cases, need to continue making payments after the bankruptcy discharge. See: What is the effect of a bankruptcy discharge on secured mortgage debt? and Can I keep my car?

Example 3 - Nondischareable Debts:

A person has a certain type of tax debt that is not dischargeable under bankruptcy law. In such case, the person is still required to pay this debt after bankruptcy because the bankruptcy did not discharge the debt.

Note: Debts for most taxes are nondischargeable (but some types of tax debts are sometimes dischargeable in bankruptcy).

Example 4 - Credit Card Debts:

A person has a Visa credit card with a balance of $3,500.00. He desires to keep the card and pay the debt after bankruptcy. May he? It depends. Because a person files bankruptcy, some creditors will deny use of the credit card in the future even if the debt is repaid! Furthermore, is it worth paying $3,500.00 just so that one can keep a particular credit card? To help analyze this question, the following hypothetical example is provided: Let's say a credit card sales person telephoned you and said:

"I want offer you a new credit card. You can have it, but it automatically starts out with a balance owed of $2,500.00, even though you have not yet used it. Is it a deal?"

Most people would respond, "No way!" Yet, in fact, that is what a person is essentially doing if he or she elects to pay off a credit card that was discharged in bankruptcy.

Note: If you have a very small balance on a credit card, you might pay it off first before filing bankruptcy. But, before doing so, seek legal counsel from a bankruptcy attorney to potentially avoid what is called a "preferential debt repayment."

You ought to be extremely cautious about paying debts that are discharged. By making payments on a discharged debt, such payments could, in certain cases, create a waiver (giving up) of the bankruptcy discharge on that particular debt. I strongly recommend that you seek legal counsel first before doing so.

For a free and confidential consultation, contact southern California Christian bankruptcy attorney Matthew B. Tozer.