What Debts Will You Still Pay During Chapter 7 Bankruptcy?

Chapter 7 is one of the most common forms of bankruptcy filed in the U.S. Chapter 7 filings mean that businesses must cease operations unless a Chapter 7 trustee is appointed to continue trading. As a leading Chapter 7 bankruptcy attorney in Montgomery County, we’ve created this post to detail what debts will still be paid during the time that the bankruptcy is in place.

Bills Incurred After the Date of Filing for Bankruptcy

When a bankruptcy case is still pending, many businesses continue to get bills coming in. All bills incurred after filing for bankruptcy will have to be paid as the court will refuse to include these items in the finalized bankruptcy. This debt is known as “post-petition” debt and needs to be paid in full.

Some common examples of post-petition debts include:

  • Utilities
  • Lease and rent payments
  • Domestic support obligations
  • Insurance
  • Taxes
  • HOA (Homeowners Association) fees

The court may wipe balances that existed before the bankruptcy if the obligation qualifies for a discharge. Debts such as utility bills are dischargeable and will get wiped out in most cases. Domestic support obligations such as child support are not dischargeable, so these will still need to be paid after the case for these debts.

Debt Secured by Collateral

When an expensive property is purchased on credit, many lenders will ask for collateral in case payments are not honored. This is known as “secured debt,” and these loans are used to take out:

  • Car loans
  • Mortgages
  • Home equity
  • Business equipment

Whether a secured debt can be discharged or not will depend on if you can provide the property that was initially pledged as collateral. If you give the bank back the collateral, the associated loan will become dischargeable in your bankruptcy case.

In Chapter 7 bankruptcy, if you want to keep collateral, you must continue to provide regular payments until a loan is satisfied. Failure to do this means that the lender can use their lien rights. Lien rights are ownership interest in the property that was up for collateral, and they can take this property back by filing a foreclosure or repossession.

For additional information, or to contact one of our bankruptcy or tax attorneys in Philadelphia, please fill out a contact form.

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