Can I pick which debts to put in the bankruptcy?
All debts must be included in bankruptcy for the court to consider discharge.
Just as individuals cannot choose which assets they may include in a bankruptcy case, they cannot decide to include some debts and leave others out of the court action.
By keeping out certain debts - and presumably, continuing to pay them, but not others - the U.S. Bankruptcy Court could conclude that the debtor is making preferential payments. Debtors cannot make preferential payments to some creditors while trying to have other bills discharged in a Chapter 7 case, because all creditors have a right to share in the value of the debtor's assets.
However, there are circumstances under which the court will allow someone filing a bankruptcy petition to address debts individually. For instance, by reaffirming a debt, the individual has voluntarily agreed to pay that particular creditor. It may be a case in which the debtor wants to keep a family car and make payments to the creditor by signing a new contract for the vehicle.
"While you can pay any creditor you choose after you file a Chapter 7 case, all creditors must be listed whether or not a debt is a dischargeable debt," according to the website of the Clagget Law Office in Bridgeport, West Virginia. "In Chapter 13, as a general rule, the same type of debt must receive the same treatment. Accordingly, you cannot pay one credit card debt at 10 cents on the dollar, inside the Chapter 13 [repayment] plan, while paying another credit card debt in full outside the plan."
In some cases, a creditor may ask a debtor to reaffirm a debt even if it is included in the bankruptcy. Usually this happens when a co-signer such as a family member or friend is involved, and the debtor does not want that individual to be solely responsible for the remaining bill.
In addition, debtors may ask the court to amend or reopen a bankruptcy case, but that is to add not remove creditors while the case remains open.
Those considering bankruptcy also need to be careful about transferring property to a new owner prior to bankruptcy. If it is done within a year before the filing, or if the property is sold below fair value within the two years before bankruptcy, the property transfer could be viewed as a fraudulent act. Unless a person facing bankruptcy handles property transfers within legal limits, the court may deny the bankruptcy.
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