You are allowed to pay off debts that you’ve discharged in a bankruptcy case. Whether it’s smart to do so, however, is another matter altogether.
If you’re thinking about filing for bankruptcy, you probably feel guilty about it.
No matter how many times I remind you that bankruptcy is a legal and contractual matter rather than a moral one, you’re probably going to wish there was another way.
That’s likely the reason why so many of my clients tell me that they’re going to repay their creditors someday.
After all, that’s what Mark Twain did after he went broke.
Here’s why you should give that some thought.
If A Debt Is Discharged, They Can’t Force You To Pay
Once a debt is wiped out in bankruptcy, the creditor can’t force your to repay the debt.
No phone calls, no letters, not even a birthday card that casually mentions something like, “Now that you’re probably getting some money for your birthday, remember that debt?”
If a creditor contacts you at all after the debt is wiped out, you can sue and collect money damages. Yes, the court takes it very seriously when a creditor disobeys a court order telling it to leave you alone.
There’s No Positive Impact On Your Credit Report
Once a debt is discharged, the creditor is not allowed to report any account activity to the credit reporting agencies.
If you make a payment, the creditor can’t report it. You get no brownie points for sending in a check.
You’re Hobbling Your Chances At Financial Recovery
If you file for bankruptcy it’s because you don’t have enough money to go around. Once your case is over, you’ve got the ability to save some money for a rainy day.
That savings will reduce the chances of you having to file for bankruptcy again in the future. That money will also help you save for retirement, unexpected medical expenses, and a host of other events.
If you send that money to a creditor, you’re right back where you started. Broke and hobbled.
Doesn’t make much sense, does it?
The Debt’s Been Sold, Anyway
Most credit card companies sell their debts to other companies when you’re 180 days past due (that’s when they “charge off” the debt).
The debts are also sold when you file for bankruptcy (yes, people buy accounts that are uncollectible due to bankruptcy).
If you send money to, say, Chase it’s not going to stay there for long. It will end up in the hands of some debt buyer who you’ve never heard of.
To the debt buyer, it’s free money. Kind of like finding loose change in the sofa cushions.
Once again, it doesn’t help you at all.
There Are Still Other Debts To Pay
Even after bankruptcy, you’ve still probably got some debts to pay.
Any debt that’s not discharged in Chapter 7 bankruptcy must be repaid.
If you owe money to a relative or close friend, you don’t need to repay the debt but it will likely make for a less stressful relationship.
Why not focus on those debts you need to pay, then rebuild your own finances?
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