Debt After Chapter 7 Bankruptcy and How it Works

When you file for bankruptcy, chances are that you will continue incurring debt even after the petition is filed. After all, filing for a Bankruptcy in Chapter 7 doesn’t stop your expenses. So, what happens to the debt that collects after you’ve filed and that continues accruing during the bankruptcy process? Here’s an overview of debt After Chapter 7 Bankruptcy, and how it works: Generally, the debt you have before your Chapter 7 bankruptcy (called “pre-petition debt”) will be discharged as result of your bankruptcy. However, any debts that accrue after the Chapter 7 petition (called “post-petition debt”) will not be discharged. Seems pretty straightforward, right? Unfortunately, identifying whether a debt is pre- or post-petition is actually trickier than it sounds. Here are some general rules concerning your debts in a Chapter 7 filing:

Monthly Payments

Any regular payments, such as your mortgage or car loan, that occur before you file for a Chapter 7 will be discharged. Any monthly payments that continue happening after the petition itself are also discharged, since the monthly payments began before the petition. However, the lien on the property remains in place, despite the bankruptcy filing.

Reaffirmed Debt

When you file for a Chapter 7, you have an opportunity to confirm that you still want to keep making payments so that you can keep the assets. This is called your “reaffirmed debt.” If the debt is reaffirmed, you must continue making payments beyond the bankruptcy, or else your creditors may come after the debt for any deficiencies.

Sandwiched Debt

If you acquire new debt that is sandwiched between the Chapter 7 filing and the discharge itself, this debt will not be discharged and will still remain your obligation. Again, the only exception is if this debt is part of a monthly payment plan that was in place before you filed.

Understanding different types of debt like “post-petition” and “reaffirmed debt” can be confusing and a litte abiguous at first. However, having a solid grasp on how your debts before and after filing are affected by your Chapter 7 bankruptcy will help you make better-informed decisions, and can help the process move along more smoothly.