Filing for bankruptcy has many benefits, including relieving you of personal liability for all eligible debt through the bankruptcy discharge. However, it may be beneficial for you to waive your right to a discharge if you would like to keep certain property after the completion of your case, or if your trustee has accused you of fraud. Be aware, however, that waiving the discharge makes the debts still legally enforceable following the conclusion of the bankruptcy case.
At the end of a bankruptcy case, you ordinarily will receive a discharge. The discharge eliminates all eligible debts that were included in the bankruptcy case, making them no longer legally enforceable against you by your creditors. A discharge essentially erases your obligation to repay the debt (although your co-signers, if any, will still be responsible unless they file, too). However, some types of debt, such as child support obligations, certain taxes or student loans, cannot be discharged in a bankruptcy case.
A reaffirmation agreement is an agreement between you and a creditor that creates a new obligation to repay a debt in exchange for your continued possession of the property. When signing a reaffirmation agreement, you waive your right to discharge the debt that is the subject of the agreement. This may occur with a car loan or a secured loan for appliances. If you enter into a reaffirmation agreement and get your discharge, that debt is not included; if the lender then repossesses the collateral, you're on the hook for any deficiency balance.
Avoiding Fraud Allegations
If the bankruptcy trustee can prove fraud or bad faith is present in your case, waiving your right to a discharge may appease the trustee such that your case remains open and assets are liquidated without criminal proceedings. Further, if the case is still open, the automatic stay will remain in effect, and your creditors will be kept at bay until the case is closed, unless they ask the court to lift the stay.
Several requirements must be met before the court will accept a waiver. First, the waiver must be in writing and you must sign the written waiver. Once the waiver is submitted, the court will review the waiver and determine whether to approve it. The bankruptcy court may hold a hearing to ensure that you understand the legal consequences of the waiver. If a reaffirmation agreement is present, the court will consider whether to uphold the agreement if a valid waiver has been signed.
Reaffirmation agreements that waive the discharge of just one debt will likely require court approval, especially if you are struggling to afford the payments.
Consequences of Waiver
Regardless of whether you choose to waive your bankruptcy discharge, filing for bankruptcy has several consequences. For example, your credit rating will be affected by filing for bankruptcy and it may be harder to obtain new credit. In addition, if you file for Chapter 7 bankruptcy, the bankruptcy trustee must liquidate all non-exempt property. Additionally, everything you file with the court is accessible by the public, including your discharge waiver and any allegations of fraud by the trustee.
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