We constantly tell people that they can erase debts with bankruptcy. But what does this mean? Are debts erased in bankruptcy gone forever? Or, can those debts come back to life?
Debts Erased in Bankruptcy Are Gone Forever
Debts that are erased in bankruptcy, including credit card and medical debts, are gone forever.
When you file bankruptcy the goal is to receive a bankruptcy discharge. A bankruptcy discharge is a court order that releases you from personal liability on certain debts. You are no longer legally required to pay back debts that are part of your bankruptcy discharge.
Creditors of discharged debts can never legally attempt to collect payment on those debts. This means your pre-petition creditors (creditors you owed money to prior to filing for bankruptcy) of discharged debts cannot legally:
- Call you for the purpose of collection, or hire a collection agency call you.
- Send your bills.
- Reinstate a wage garnishment or bank levy from before you filed bankruptcy.
- Sue you for that unpaid debt.
- Bring back to life a lawsuit for the unpaid debt that was pending when you filed for bankruptcy.
- Pursue payment on a judgment against you they received prior to when you filed for bankruptcy.
Once you receive your Bankruptcy Discharge Order, your dischargeable debts are erased forever.
You Are Liable For Debts Incurred After Bankruptcy
Your bankruptcy discharge order will apply to all debts you owed on the day you filed for bankruptcy. You will not be personally liable to pay back your dischargeable debts once you receive your bankruptcy discharge.
However, you are liable for debts you incur after the date you file for bankruptcy. If you take out a loan or credit card or incur any new debt, after the date your bankruptcy is filed with the Bankruptcy Court, that debt is not part of your bankruptcy. If you default on paying a post-petition debt back, your creditor will have the right to pursue all legally available collection actions against you.
The Date You File Bankruptcy is Key
The most important date when it comes to bankruptcy is the date you file, not the date of discharge. In fact, the filing date is important for many reasons. On the date, you file the Automatic Stay takes effect. The Automatic Stay is a provision in the U.S. Bankruptcy Code that makes it illegal for creditors to attempt to collect on debts from a person who has filed for bankruptcy protection.
The fair market value of your assets are determined on the date of filing. This is important when it comes to protecting your assets through bankruptcy, and even when pursing a lien strip in a Chapter 13 bankruptcy. Also, the dischargeability of older tax debt hinges on the bankruptcy filing date. And as noted, debt incurred after the date you file for bankruptcy are not included in the bankruptcy.
Here at the Law Office of Barbara B. Braziel we make sure you understand the benefits of bankruptcy and how filing will affect you and your family. We take the time to explain the bankruptcy process to our clients. We invite you to learn more about our firm here and come meet with us for a free no-obligation consultation.
Reach out to us by email at info@BrazielLaw.com or call (912) 351-9000.
Find out more about being debt free in our guide: All About Debt Relief
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.