This is a court order issued by the bankrupty court that notifies all creditors that the amount of money owed by the debtor to the creditor has been discharged, and bars the creditor from taking any action to attempt to collect the debts. Even though a chapter 7 does not provide a debtor with a mechanism to force creditors to reinstate defaulted loans, chapter 7 debtors may continue to make payments and retain property if they were either current on the loan at the time of the filing, or if the creditor agrees. Please note that the trustee may seize the property if it is not exempt. This generally occurs only if there is some market value to the property in excess of the amount owed. However, if there is marginal value to the asset in excess of the loans, the trustee usually abandons the asset, allowing the debtor to keep it provided that the debtor is able to satisfy the creditor.
Creditors often ask debtors to reaffirm a debt.
This essentially means that the debt is not affected by the bankruptcy filing. If the debtor elects to reaffirm the debt, the reaffirmation should be accomplished prior to the granting of a discharge. A written agreement to affirm a debt must be filed with the court and, if the debtor is not represented by an attorney, must be approved by the Judge. The Bankruptcy Code requires that reaffirmation agreements contain an explicit statement advising the debtor that the agreement is not required by bankruptcy or non- bankruptcy law. In addition, the debtor's attorney is required to advise the debtor of the legal effect and consequences of such an agreement, including a default under such an agreement.