Blog > 2022 > January > Contracts Can’t Waive Your Right To File for Bankruptcy
If you’ve ever inspected your credit card contract closely enough, you may have noticed a clause stating that you waive your right to file bankruptcy with this debt. In other words, if you decide to file bankruptcy in the future, don’t expect to add this debt to the eliminated pile.
That’s a sort of frightening prospect, especially if you’re thinking about filing for bankruptcy. Isn’t the whole point of bankruptcy to erase what you owe? In a word, yes.
This is precisely right: the goal of filing for bankruptcy is to get rid of debt.
Now, think about this, if it were simply a matter of adding a “no bankruptcy” clause to a debtor’s contract … wouldn’t all debtors be doing it? It’d certainly be a great way to keep people from bailing on what they owe you.
And for this reason, you can probably see right away that the answer is no. It is not enforceable for most credit card companies to maintain non-dischargeable debt in bankruptcy. Legally, they can’t do this. The same goes for other types of lending. Adding a clause that waives your right to file bankruptcy on the debt at hand is not usually possible.
Even though it is not usually possible to include a clause that maintains non-dischargeable debt in bankruptcy, some exceptions exist.
Most notably, if you sign a reaffirmation agreement for your debt, you will automatically be liable to pay it back if you file for bankruptcy. Your reaffirmation agreement will be part of your bankruptcy filing. In addition, there are some “objections to discharge” that can be made in court. And finally, sometimes, a debtor will lose their discharge. In this case, the lender may regain their ability to collect what’s owed to them.
Understanding financial contracts and bankruptcy law is not most people’s strong suit. It can be incredibly intimidating if you’re considering filing for bankruptcy. Regardless of what language your credit card company or bank puts in a contract, they are not allowed to take away your right to file for bankruptcy. The Constitution guarantees the right to file for bankruptcy. We are a country of second chances, and bankruptcy is a helpful tool for financially getting back on your feet.
Have you been thinking about filing for bankruptcy? Are you scared or confused about the laws surrounding this type of financial move?
SM Law Group can help. We are a bankruptcy law firm located in Encino, California. Our experienced team of skilled attorneys is here to offer the best debt relief solutions to fit your needs.
Contact us today to book an appointment and discuss your bankruptcy options with one of our attorneys.
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