Can I Be Sued After Chapter 7?

By Tom Streissguth

If your debts have become unmanageable, you have the option to file for bankruptcy protection. Under Chapter 7 of the federal bankruptcy code, you must submit a petition in bankruptcy court. You must notify the court of creditors to whom you owe money, and list your assets on the petition. A trustee takes control of your assets, which can be liquidated (sold) to pay secured debts. During this process, you are temporarily protected from creditor lawsuits.

If your debts have become unmanageable, you have the option to file for bankruptcy protection. Under Chapter 7 of the federal bankruptcy code, you must submit a petition in bankruptcy court. You must notify the court of creditors to whom you owe money, and list your assets on the petition. A trustee takes control of your assets, which can be liquidated (sold) to pay secured debts. During this process, you are temporarily protected from creditor lawsuits.

Automatic Stay

A petition for bankruptcy results in an automatic stay, issued by the court in which you filed. The stay is a court order to creditors to cease all collection actions against you. Creditors are not allowed to contact you, demand payment by phone or letter or any other means, or initiate any litigation against you. Any pending lawsuits are stayed as well.

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Notification

The bankruptcy court notifies all creditors whom you have listed on the bankruptcy petition. The law requires notification to all creditors, whether they are private or public, secured or non-secured. If you fail to list a creditor on the petition, however, there is no notification, and that creditor is not legally barred from continuing or initiating any lawsuits.

Discharge

At the end of a successful bankruptcy case, the court issues a discharge of all dischargeable debts. The creditors no longer hold any claims against your assets; therefore they are barred from filing a lawsuit to collect on their past-due accounts. If the debt is nondischargeable, however, you remain liable for the full amount, and you can be sued for repayment. Nondischargeable debts include federal and local taxes, federally guaranteed student loans, criminal restitution penalties, child support and alimony.

New Debts

Once the discharge occurs, your bankruptcy case is effectively over and you return to your pre-bankruptcy status: liable for all debts incurred since the filing of your bankruptcy petition. If you take out new loans, return to borrowing on credit cards, or buy a house with a mortgage, you are responsible for full repayment, and the creditors can bring legal action if the loans go delinquent. A bankruptcy case only protects you from lawsuits after the stay and before the discharge. The same applies if the bankruptcy is dismissed (for example, if you fail to meet the legal requirements for bankruptcy protection, or if the court finds you are capable of meeting your financial obligations). The automatic stay ends and you are again liable for repayment of any debts.

Reaffirmation

Debtors have the option to reaffirm debts in bankruptcy. This means that you accept the obligation to repay, even if the debt would otherwise be subject to discharge. This might occur if you wish to keep property that would otherwise be sold off by the bankruptcy trustee. The court must approve any reaffirmation agreements, and your creditor may sue you any time after the discharge for repayment if you can't meet the payments.

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Define Bankruptcy Terminated

References

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Can a Creditor Sell to a Third Party If It Is Included in a Bankruptcy?

Lending institutions, such as banks and credit card companies, often sell delinquent debts to collection agencies in a process known as an assignment of claims. When you file a petition for bankruptcy, you are entitled to protection from your creditors collecting on your debts. Although the ability of your creditors to assign your debts is unaffected by your filing a petition for bankruptcy, any new holder of the debt is also prohibited from seeking payments during your bankruptcy or after your debts are discharged at the end of your bankruptcy case.

What Happens if I Don't Reaffirm My Mortgage After Bankruptcy?

Filing for Chapter 7 bankruptcy is a means to discharge your debts and get a financial "fresh start." A home mortgage is a debt secured by property: the home in which you live. Filing for bankruptcy does not cancel your obligation to repay a loan if you remain in the home, nor does it end the bank's lien on the home, in case you should default on the loan. During a bankruptcy, you should consider the pros and cons of "reaffirming" your mortgage agreement.

Schedule F Bankruptcy Discharge

Bankruptcy means a fresh start – a court order protects you from collections and lawsuits, and eventually, the court discharges (cancels) some of your debts. You must report your assets and liabilities, and you will be required to sell your non-exempt property to repay creditors (in Chapter 7) or set up a repayment schedule (in Chapter 13). As your bankruptcy case begins, you'll complete a Schedule F, and it's vital to know the difference between a secured and unsecured debt when preparing this form.

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