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Can I Pay Debts that were Discharged in my Arizona Bankruptcy?

By Joseph McDaniel, Esq.

Absolutely!

Every now and then people will talk to me about bankruptcy (actually, people usually talk to me about bankruptcy several times a day, but that's a different story) and become increasingly agitated, asking more and more questions about the Bankruptcy Discharge in a Chapter 7.

And by now (I've been helping people and businesses file bankruptcy cases in Arizona for about thirty years), I'm sometimes able to tell where bankruptcy questions are going, so I can figure out their real concern: they want to know whether they can pay back a friendly creditor after they receive their discharge in their Chapter 7 Bankruptcy.

Sometimes they want to pay back Mom after the discharge, because otherwise Thanksgiving and Christmas will be a little strained for the next twenty years.

Sometimes they want to pay back brother or sis after a bankruptcy discharge, for similar reasons.

Sometimes they want to reward a doctor for continuing medical services by making post-discharge payments on pre-petition debt, and sometimes they want to make good on a pledge they made to their Church.

Whatever the reason, this is one of the few areas of Bankruptcy Law and Practice in Arizona that is absolutely clear and distinct: a debtor can pay back a creditor after a bankruptcy filing, just because the debtor wants to pay, after the discharge. 

The Bankruptcy Discharge is the brass ring that makes you want to file a bankruptcy in Arizona, or anyplace else. It's the Court Order enjoining (forbidding) the creditors who had debts that were discharged from chasing you as to your personal liability.

Note that a properly perfected lien (like a mortgage or a lien on your car, or a judgment lien on your house) survives your bankruptcy, and made darn sure if you have a judgment lien and want to scrape it off that you tell me about it! It costs money to get a judgment lien scraped off in your bankruptcy, and it's not a part of an ordinary uncontested bankruptcy case; that is, your lawyer won't do it automatically unless you let him know about the lien and ask to have it scraped off inside the bankruptcy case.

But that's a post for another day.

Today we just note that if you want to pay back a buddy who you had to list (because it's a crime to intentionally fail to list a creditor in you bankruptcy in Arizona) as a creditor in your bankruptcy, that's a privilege you have!

Some debtors go a little crazy and pay back all of the debt that was discharged in their Chapter 7 Bankruptcy Case, but that's so unusual that people write about it in books!

p.s. and yes, one of my clients paid back all of the debt that was discharged in a Chapter 11 Business Bankruptcy Case! I told him he was crazy as a bedbug, but he did it anyway!

Full post as published by Arizona Bankruptcy Attorney Blog on December 26, 2010 (boomark / email).