Line Drawing and the Bankruptcy Discharge: Why Prepetition Stipulations Are Enforceable but Prepetition Waivers Are Not

“The legal effect of the discharge is powerful in its simplicity: the debtor is freed from the obligation to pay prebankruptcy debts.” Although the consumer debtor has no right to discharge, it is regularly granted to debtors who have not run afoul of any of the provisions of § 727(a), which is “the heart of the fresh start provisions.” When the debtor is freed from liability for prepetition debts, the debtor’s creditors suffer the loss of nonpayment. Therefore, creditors desire a bankruptcy system that does not overly favor debtors. In general, the current Bankruptcy Code represents an appropriate balance between prodebtor and procreditor views. Despite the balance, creditors continue in their attempts to circumvent the bankruptcy discharge, which has the potential to erode the effectiveness of a debtor’s fresh start. Because the automatic stay and discharge injunction prohibit the types of postpetition actions a creditor can take to collect a debt, creditors tend to focus their efforts on prepetition preventive measures. The scope of this Comment, therefore, is limited to prepetition attempts creditors make to transform a debt that is otherwise dischargeable into one that is nondischargeable. In particular, the analysis of this Comment is confined to Chapter 7 consumer cases—the most common type of bankruptcy case. This