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(Video) Do Creditors Get Paid In Chapter 7?

Written by Wesley Scott | July 18, 2018 at 1:45 PM

You don’t make payments back to your creditors in a Chapter 7 Bankruptcy. This is the opposite of a Chapter 13 Bankruptcy where you make regular monthly payments back to your creditors through a Chapter 13 Bankruptcy trustee.


The function of a Chapter 7 trustee is different than a Chapter 13 trustee. Chapter 13 trustees must have offices set up to receive a large volume of payments from thousands of Chapter 13 debtors. Chapter 7 trustees have offices set up to be able to liquidate nonexempt assets not receive a large volume of payments.

Debtors who file Chapter 7 Bankruptcy stop making payments to their creditors prior to filing the Chapter 7 case and never make payments again on the debt. The vast majority of Chapter 7 Bankruptcy filers throughout the United States get Chapter 7 Bankruptcy discharges relieving debtors of the legal liability on these debts, tax free, forever.

If you are referring to the bankruptcy where no one makes payments back to their creditors, you are referring to a Chapter 7 Bankruptcy, sometimes referred to as a “fresh start” bankruptcy. Now, one little caveat to this is in order. While the Bankruptcy Code bars creditors from collecting from you, upon discharge, the code does not prevent you from voluntarily paying creditors back.

Why would you do that? Well, maybe you know and need the local lumberyard to help you with credit in the future. Or, maybe you know the local dentist or orthodontist and want to continue go there. While we discourage guests from repaying debt, because it inhibits the “fresh start” you sought, it can be done.

CONCLUSION

When the time is right, or when you are ready, reach out to Minnesota’s nicest bankruptcy law firm at www.kainscott.com. You will be glad you did!