Pick & Choose: Which Debts Must be Included in my Chapter 7 Bankruptcy?

All debts are not created equal.  Some debts obtain favored status through the law – debts like taxes or child support.  But some debts are a priority based on who is owed the debt.  For instance you may feel much more obligated to pay a family member you owe money to or to pay the doctor that brought you back to health.  To file bankruptcy on those debts may just seem wrong.  And because of this many people will tell me that they don’t want to include certain debts in their bankruptcy case.

It is totally understandable, but there are two problems with this.  First, you are required to disclose all of your debts to the bankruptcy court – even those debts that don’t go away (like child support) and those debts you feel morally obligated to pay.  Second, including all debts makes sure that you get the fresh start you are seeking by filing bankruptcy in the first place.  Even though you may have the best intentions on repaying a certain debt after bankruptcy, life happens.  I don’t doubt that you had honorable intentions when you incurred all of your debts.  However, the circumstances of life have led you to bankruptcy because you couldn’t pay your debts.  So, even though you want to pay all of your debts, sometimes it doesn’t work out that way.  That is why you need to make sure all of your debts are included.

Also, while your bankruptcy discharge will eliminate any legal obligations to pay your debts, you can voluntarily repay any debt you choose after your bankruptcy is over.  Most often I see this in the medical field.  If you owe a doctor money and the debt is discharged in bankruptcy, don’t be surprised when that doctor will no longer have you as a patient.  While I am sure your doctor truly cares about your well-being, you need to remember, as my Dad always told me, there are three reasons we go to work: lunch, break, and payday.  If they aren’t getting paid they likely won’t continue to provide services.

So, if you are receiving medical care from a specific doctor that you anticipate will be ongoing, you must disclose the debt you owe that doctor but will likely need to continue to pay the amounts owed after your bankruptcy is over if you expect to receive ongoing medical treatment.  Orthodontist are another area where this comes into play.  If you want those braces to come off someday, you will likely need to make some type of payment arrangement with the good doctor.  The alternative in both scenarios is to seek out a new doctor.

To answer the question: there is no picking and choosing, you must disclose all debts that you owe as of the time of your bankruptcy filing.

Important Note:  While you can voluntarily pay anyone you want after your bankruptcy case is over, it is a bad idea to try and pay debts owed to your family before your bankruptcy case is filed.  If you owe your family money before your case is filed, and you hurry and pay them off and then expect to file bankruptcy you should also expect that the bankruptcy court will reach out to your family and try and get that money back.  And by try I mean they will sue them and make them return to the money (that won’t make things awkward at all!) so that it can be distributed among all of your creditors.  So if you owe a family member, wait until after your bankruptcy case is over if you would like to pay them back.