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Chapter 7 discharge, debt reaffirmation and their effects

For Texans who are experiencing financial challenges and seeking debt relief, a bankruptcy under Chapter 7 is a useful alternative to help them move on with their lives. There are, however, numerous aspects to filing for Chapter 7 that must be understood. Knowing what a Chapter 7 discharge is, the possible effects, and the effects of a debt reaffirmation are some of the issues that need to be considered.

With Chapter 7, the goal is to discharge most of the debts that are listed. This is an order from the court that the debtor will no longer have to pay the debts. There are exceptions to this. Taxes, student loans, child support, alimony, court-ordered fines, restitution, debts accrued through deception and fraud, and personal injury debts that came about due to driving under the influence of alcohol or drugs are all exempt. The entire discharge can be denied if property is destroyed or concealed, records are destroyed or concealed, or a false oath is given. The creditors are not allowed to ask the debtor to pay any debts that were discharged. A Chapter 7 is only available once every six years.

After a discharge, the debtor must know that there are possible effects after it has been completed. The bankruptcy can show up on the credit report for as long as 10 years. Because of this, it can harm a person's ability to get credit. If there are debts that were not listed when filing for Chapter 7, the debtor might have to pay them back.

After the petition has been filed, the creditor has the right to ask that a certain debt be reaffirmed. A document will be signed with the court and is says that all or part of the debt must be repaid when it otherwise would have been discharged. In general, this must be filed within 60 days of the first meeting of creditors. This is voluntary and is not required under the law. No undue burden must be placed on the individual or dependents when the reaffirmation is signed. It can be canceled before the court issues the discharge order or within 60 days after the reaffirmation was filed. Action can be taken by the creditor if there is a reaffirmation and it is not paid.

Bankruptcy can be confusing and its rules complicated. Those who are thinking about filing should make sure to have assistance from an attorney who is experienced in Chapter 7 bankruptcy or other options that could be beneficial and preferable.

Source: txs.uscourts.gov, "Duties and Responsibilities of a Debtor Under Chapter 7 and Attendance at the 341 Meeting of Creditors," accessed on Nov. 29, 2016

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