Another frequent question I get from potential clients is whether debts that they are making payments on as part of a “debt consolidation” program are dischargeable in a bankruptcy case. In fact, I’ve had numerous people think that those aren’t even debts anymore, once they are in a repayment program, or that magically the 15 debts they consolidated are now just one debt. Let me provide some simple, concise answers or explanations to these questions/comments.

1. Yes, debts that have been consolidated or are in a repayment program are dischargeable in bankruptcy, assuming that there are no independent grounds for objecting to the discharge. (see more on dischargeable debts)

2. When you enter into a debt consolidation program, you still owe the debts until they are paid in full (which presumably includes the fees to the consolidation agency). Thus, if you file a bankruptcy case, you must list any and all such debts. (See my recent article on picking and choosing which debts to include in bankruptcy.

3. Just because you have consolidated your multiple debts down into one payment does NOT mean that you don’t owe each of the individual creditors, unless they were paid off by a single consolidation loan that was taken out. What this usually means is that you are paying a company to make the payments to each of the creditors, while you make one single payment to the consolidation company, but you still owe each of the creditors until they are paid off.