14 Dec 2016

File Bankruptcy And Keep Paying These Critical Creditors

You’ve filed bankruptcy.

Your creditors are stayed.

A bankruptcy discharge is ahead.

You’re out from under unrelenting pressure to pay creditors.

But don’t let your sense of relief keep you from planning:  who should you pay now that you’re in bankruptcy?

Paying bills after filing bankruptcy

Two legal realities drive who needs to be paid going forward:

  1.   Not all debts are discharged in bankruptcy
  2.   Liens survive bankruptcy, unless there’s a court order otherwise.

Is this debt discharged?

The scope of the bankruptcy discharge is different in Chapter 7 and Chapter 13.  The list of exceptions to discharge that apply in Chapter 7 is longer.  Chapter 13 discharges more debts, but the discharge isn’t effective until the last plan payment is made.

Child and spousal support are not dischargeable in any chapter of bankruptcy.  To the extent not paid in the case, your obligation for delinquent and future support continues.

Student loans are the other blockbuster debts that survive a discharge in either 7 or 13.

Recent taxes are the third common debt excluded from the discharge.

Is the debt secured by a lien?

The discharge wipes out your personal liability for dischargeable debts.  But any lien associated with the debt survives as a charge on property you owned before filing.

So, you need to decide whether this is an asset 1) you want to keep, and 2) is the creditor likely to enforce the lien if you don’t pay?

If you are surrendering real property or a car you can’t really afford, don’t pay because you don’t intend to retain the asset.  If it’s a tax lien that attaches only to your household goods, it’s probably safe to not pay.  The IRS isn’t interested in your dirty socks.

However, if it’s your home or the car that gets you to work every day, then you want to stay current or get current, lest the creditor enforce the lien.

More money, less information

One of the exceptionally frustrating things about filing bankruptcy is that even when you want to keep paying on your home or your car, the creditor doesn’t send a statement so you know when and how much to pay.

While I rail about the insanity of the situation, the creditor who stops sending statements is generally just playing it safe.  Send a statement and you can be accused of violating the automatic stay or the discharge injunction.

Ask the creditor to send statements.  Ask your bankruptcy attorney to get court permission for the sending of statements.

And even if the creditor doesn’t make it easy, be persistent.  You care about keeping your stuff far more than the creditor cares about your convenience.

Most banks terminate automatic payment arrangements or even access to online banking when you file.  Make sure that you are watching your accounts and monitor whether things you want paid are getting paid.

Make and keep a record of having paid;  creditors are notorious for misapplying or not applying payments.


Read the other half of this great article on Bankruptcy Soapbox’s Blog here: http://bit.ly/2huStKu

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