When you file for bankruptcy, you don’t have to make payments on most of your debts anymore.
But there are some debts that you still have to pay after your bankruptcy is discharged. These include:
- spousal support or child support
- court fines and fees
- government student loans, if you graduated less than 7 years ago
- secured creditors you kept during bankruptcy, like a mortgage or a car loan
- debts that are the result of a crime
If you have debts that have to be paid after your discharge, you will have to pay them during and after your bankruptcy. It is a good idea to discuss a payment plan with your creditors.
Spousal and child support payments
Bankruptcy does not erase child support or spousal support requirements. Even if you are bankrupt, you are still responsible for making your support payments. If you do not make your support payments while you are bankrupt, you will have to pay interest on any late payments.
Student loans from a private bank are erased in a bankruptcy. But government student loans are not erased unless you have been out of school for over 7 years when you file for bankruptcy.
If you have been out of school for over 5 years but less than 7 years, you can ask a court to erase your government student loans because of financial hardship. If the court does not erase the loan, you will still have to pay it back after your bankruptcy.
Secured debts are debts that have collateral. Collateral is what you agree to use as insurance that you will pay your debt.
For example, the collateral for a mortgage is your house, and the collateral for a car loan is the car. If you cannot pay back your mortgage or a car loan, the lender can take your house or your car to cover some or all of the amount you owe.
If you can’t pay a secured debt, you can include it in your bankruptcy by giving up the collateral. The secured creditor will be paid back from the sale of the collateral. If you can’t pay off the whole debt by selling the collateral, the amount that you still owe will be added to your other unsecured debts.
You can only decide to include your secured debts at the time that you file for bankruptcy. You can’t change your mind after you have set the terms of your bankruptcy. If you end up keeping the secured asset during your bankruptcy, you are responsible for making all payments.