Surviving and Thriving After Bankruptcy: Ongoing Obligations

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After bankruptcy, you still have to make your payments to keep your car. Getty Images

In our series about Surviving and Thriving After Bankruptcy, we are discussing a number of things that you need to know in order to make your transition out of bankruptcy and financial discord as productive and efficient as possible.

In this article we talk about the ongoing obligations you have, both the court and to the creditors of debts that survive the bankruptcy case.

Obligations to the Court

Most people believe that the discharge order is the end of the bankruptcy case.

That is not technically true. You may have received a discharge, but your obligations continue to the court until the case is finally closed and perhaps even further.

Your bankruptcy trustee has a number of duties to perform in relation to your case. One of the most important is administration of assets. If you have assets that are not exempt, the trustee will need to decide what to do with them. If they have little or no value to the bankruptcy estate and the creditors, she may decide to abandon them - meaning that she will not take possession of them and sell them to generate funds for the creditors. They, in effect, are abandoned back to you, the debtor, to do with what you please.

That will not happen legally until the trustee files a report that indicates that she is actually abandoning the assets. Therefore, it is important to refrain from doing anything to change, transfer, sell, or otherwise dispose of any of your property until the trustee has formally determined that she will not challenge your exemptions and abandons any nonexempt property.

Read more: The Fate of Nonexempt Assets in a Chapter 7 Case

On the other hand, the trustee could either challenge your exemptions, if she believes that you are not properly claiming them, or she could decide that your nonexempt property is worth something to the bankruptcy estate. It’s up to your trustee to report to the court whether there are assets that he or she needs to administer or sell.

Many trustees file a report with the court immediately after the Meeting of Creditors detailing whether or not there are assets. Other trustees take longer to do this, sometimes because they want to investigate the case more or because there is indeed some assets that need to be sold and creditor claims to be reviewed and paid.

If the trustee is investigating further, or there are assets you need to turn over, you must continue cooperating with the trustee to make that happen. Your discharge is not a right. It is a privilege. If you resist, the trustee can ask the court to revoke your discharge, and that is not a good thing.

Obligations on Debt that Was Not Discharged

Not all debt is discharged in a bankruptcy case. Some debts are automatically not discharged, like alimony, child support, recent taxes and student loans. Others can be declared nondischargeable if the creditor asks the court to consider them nondischargeable, like recent luxury purchases. See these articles to get more Information on discharge of particular debts:

Discharging Debts: Overview

Discharging Debts: Debts That May Be Discharged

Discharging Debts: Debts That Are Not Discharged

If the debt is not discharged, it is likely that the creditor will contact you shortly after your discharge is entered to make payment arrangements.

If you fail to pay, the creditor will have the same rights to collect that existed before the bankruptcy was filed, which may include letters and phone calls, filing a lawsuit, repossessing collateral, obtaining a garnishment against your wages, or seizing property to sell.

Some debts are not discharged because you chose to reaffirm the debt. That usually happens when the debt is secured by collateral that you want to keep. You will sign a reaffirmation agreement in which you in effect remove that debt from the bankruptcy and agree to continue making payments according to the original or renegotiated terms.

Ideally, you had discussed these reaffirmation agreements with your attorney early in the process of filing bankruptcy and on advice of counsel had continued making payments. If you have not kept up your payments, you must secure an agreement from your lender to allow you to catch up, or you must renegotiate your payment terms as a part of the reaffirmation process.

In any event, you’ll be making payments on these debts.

For more articles in the series, see

Surviving and Thriving After Bankruptcy: Introduction

Surviving and Thriving After Bankruptcy: Dealing WIth Emotions, Part 1

Surviving and Thriving After Bankruptcy: Dealing With Emotions, Part 2

Surviving and Thriving After Bankruptcy: Ongoing Obligations

Surviving and Thriving After Bankruptcy: Taking Stock of the Future

Surviving and Thriving After Bankruptcy: Getting New Credit

Surviving and Thriving After Bankruptcy: Credit Reports