What Happens to Debt?

What happens to all of my debt?


The short answer is that much of it is simply not paid. Financial institutions figure that some borrowers will simply not be able to pay and charge interest rates accordingly. If you owe money to an individual and want to pay it voluntarily after your bankruptcy is over, that is OK, but you do not have to. The final order in a bankruptcy is called a “discharge.” This is an order prohibiting creditors from trying to collect your debt ever again. It could remain on your credit report for 10 years.

Not all debt is covered by the discharge. Some debts like student loans, most back taxes, and fines like parking or speeding tickets are not covered by the discharge. If you are making payments on a house, car, or big-ticket item, you can keep the property as long as you keep making payments. You can also “surrender” the property back to the bank if you cannot make the payments or no longer want the property. In a Chapter 13, these payments can be restructured and included in a consolidated repayment plan.