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Can you pick and choose what is included in bankruptcy?

You want to file bankruptcy, but not for all of your debts. Do you get to pick and choose?

For instance, one woman decided to file, but she was making payments on her car. She wanted to keep the car loan out of the court process, and she thought that she did so. She never missed a payment. Her debt was discharged as intended with the bankruptcy.

She then checked her credit, and the loan was listed as an element of the Chapter 7 filing. She contacted the creditor, and she was told that she could not keep the loan out of bankruptcy, no matter what she wanted.

She was confused, wondering why she still had to pay if her credit report was still going to contain that loan as part of her bankruptcy.

Exactly why the woman thought she could keep the loan out is unclear, but her lender is right. Typically, all assets must be included in Chapter 7. Yes, there are exemptions, but you cannot just go through and pick and choose which debts you want to discharge. You must be honest and transparent, listing out all that you own and owe.

In this case, that did not mean she lost her car. That's why she still had to make payments. She just had to sign a reaffirmation agreement saying she would keep paying and meet that obligation.

Every bankruptcy case is different, but this example shows how many misconceptions people have regarding the process. This can lead to costly mistakes. Make sure you really understand the process if you decide to use Chapter 7 to discharge your debts.

Source: Bankrate, "How do you keep your car in bankruptcy?," Justin Harelik, accessed April 05, 2018

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