Can a Debtor Collect My New Car After Bankruptcy?

Bankruptcy protection provides the debtor with a fresh start or with a realistic plan to pay back debts. In most cases, a creditor cannot collect or attach a post-bankruptcy purchase to a pre-bankruptcy debt.

Types

There are three bankruptcy chapters used by individuals -- Chapter 7, 12 and 13. A Chapter 7 is often called a liquidation and is used by debtors who have little or no assets and little or no income. Chapters 12 and 13 are reorganizations and are used when the debtor has assets and a regular source of income.

Function

In a Chapter 7 discharge, all qualified debts are released. Creditors may not attempt to collect on the debt after the bankruptcy court approves the discharge. In a Chapter 12 or 13, the debtor creates a repayment plan that allows him to keep valuable assets while still paying back most of his debt over a three- to five-year time period. The bankruptcy is not actually discharged until the repayment period ends successfully. The debtor, however, is protected from creditors during the repayment period as long as he abides by the plan accepted by the court.

Considerations

Certain debts cannot be discharged in a bankruptcy such as tax debts, debts not listed in the bankruptcy, federal student loans, spousal or child support and certain tort claim liability debts. If a debt has been discharged, the creditor may not attempt to attach or collect your new car after the discharge. If, however, the debt was not discharged, the creditor may still attempt to collect it through any legal means available even after a bankruptcy discharge.

References

• Findlaw: Bankruptcy Law Effect of Bankruptcy Discharge
• United States Courts: Process
• United States Courts: Discharge in Bankruptcy