Once your Chapter 7 bankruptcy filing has been completed and your debts are discharged, it is possible that you can incur more debt. Whether you have taken out new loans or fallen behind on old bills, debts can continue to roll your way. Here is what you need to know about post-petition debts:
Can Bankruptcy Eliminate Post-Petition Debts?
Debts that you have prior to filing Chapter 7 are usually discharged. This means that you are no longer liable for them.
Debts that you have incurred after the filing is complete, or post-petition, are your responsibility. You have the option of paying them or facing legal action from the creditors.
What Happens With Ongoing Payments on Debts?
When you file for bankruptcy, you are no longer liable for the debts. However, if you have a secured debts, such as your mortgage, the creditor still retains the lien against your property.
Secured debts involve collateral of some sort. In the case of your mortgage, your home is the collateral.
After the bankruptcy filing, if you fail to make payments on the secured debt, you could lose your collateral. If the debt is your home, the lender can choose to foreclose on it.
What If You Reaffirm the Secured Debt?
Following the bankruptcy filing, the lender can allow you to retain ownership of the collateral in exchange for an agreement from you. The agreement, or reaffirmation, means that you agree to pay the debt to the lender.
If you do not sign the agreement, the debt is wiped out and the lender takes possession of the collateral at some point. However, if you sign it, you not only still have the debt, but you are personally liable for it.
If you have fallen behind on the debt, you could still end up losing the property and also be responsible for paying back the money owed to the lender. If you do not pay, the lender can take legal action and also report it to the credit bureaus.
Your credit history could take a huge hit as a result and that could impact your ability to secure new credit in the future.
Dealing with debt following a bankruptcy filing can be tricky. To avoid getting in a bad financial situation, it is best to work with a bankruptcy attorney. The attorney can help you avoid the pitfalls of post-petition debt and also advise you on the best way to handle your filing. To learn more, contact a company like Reppe Law Office.