Let’s imagine that Tom Martin owed a local hardware store $875 for tools and supplies. Unfortunately, Tom Martin was overloaded with debt, and he couldn’t pay off the amount he owed to the store. Eventually, Tom decided to declare bankruptcy. He found a good lawyer, and he filed for bankruptcy. After proceeding through the judicial system, the bankruptcy court erased all of Tom’s debts.

Nevertheless, Tom had always had a good relationship with Jim Miller, the proprietor of the hardware store, and he felt guilty that Jim had never been paid. He dreaded going back into the hardware store. So one Friday afternoon when Tom was purchasing some electrical supplies at the hardware store, Tom spoke with Jim, the store owner. He told Jim he was truly sorry for having to declare bankruptcy, but that he just was too far into debt. At the same time, Tom told Jim, “You know, I never intended for you not to get paid. Therefore, I promise you that I’m going pay you all that I owe you, the same as if I had never filed for bankruptcy.”

However, Tom’s financial situation never got any better. Despite making this promise to the owner, Tom never paid anything to the hardware store at all. So after six months, Jim, the store owner, hired his own attorney. And he sued Tom for the full amount owed. Eventually the case went before the court. Who do you think will win, Tom or Jim?

Can the Hardware Store Enforce This Debt?

In most jurisdictions, Jim, the hardware store owner would prevail. The court would no doubt rule that the bankruptcy court only barred the enforcement of the debt. However, it never wiped out the moral obligation to pay the amount owed. As a result, most likely the court would rule that the actual debt, coupled with the moral obligation to pay that debt, is sufficient consideration to support the new pledge to pay off that debt.

In some states, courts have said that in such situations like this, the new promise made by Tom revives the old debt he originally owed to the hardware store. In other words, the moral right continued to exist. It was only the remedy that had been barred by the bankruptcy court.

This is all consistent with a long-standing principle of law that an earlier debt constitutes sufficient legal consideration for a subsequent promise to pay that debt. This legal rule applies not only to bankruptcies, but also to debts that are barred from enforcement by the statute of limitations. In most states, a creditor has four years to sue on a debt that is past due. If he waits ten years, he can no longer legally collect the debt. However, after ten years, if the debtor makes a new promise to pay the old debt, then the new promise is enforceable.

John Allen Farrer, is a retired lawyer who writes extensively on various legal topics. He recently wrote a helpful report on finding lawyers, the title of which is “How to Find a Good Attorney.” For a limited time, you can receive a free copy of this report by going to his website, Finding the Best Lawyers