We often are asked about how a bankruptcy will affect a person’s bills, with many people questioning whether they should continue to make payments prior to a filing.
If you are thinking about applying for bankruptcy and are delaying bill payments or spending, you should proceed with caution. Courts and trustees generally do not like to see large amounts of spending in the three to six months leading up to a filing.
For unsecured lines of debt, like credit card debt, you may be able to stop making payments and it may be okay—however, you should be aware that you could face collection attempts. However, if you have secured lines of debt like car loans or housing loans, you should continue to make payments at the risk of losing property. Additionally, you should continue to pay student loans to avoid wage garnishment.
Prior to your filing, you should also stop using any credit card included in a bankruptcy. Any large charges within a six-month window could be scrutinized by the court—the appearance of improper, reckless or careless spending could end up with your case being tossed out of court.
If you do receive phone calls from creditors prior to your filing, you should let the representative know that you intend to file for bankruptcy—once your filing takes place, your creditors will be notified.
How Can a Bankruptcy Help Me?
Remember, when you file for Chapter 7 bankruptcy, you can discharge debts like credit card debt and medical bills—so it is important that you avoid doing things that may be construed as immoral, like making large purchases prior to a filing.
In addition to discharge, all forms of bankruptcy allow for an automatic stay, which will end all collection attempts, should you decide to stop paying your bills prior to a filing.
To qualify for a Chapter 7 bankruptcy, you will need to pass “the means test”, which measures your monthly income. If you do not qualify for this form of bankruptcy, there are other bankruptcy options available, including Chapter 13 bankruptcy, which allows for debt payment plans.
For more information about how you can eliminate your bills, call us at (202) 483-6070. You can also visit our Facebook page, our LinkedIn page, our Google+ page or our Twitter page for further information about bankruptcy.
Law Firm of Kevin D. Judd – Maryland and Washington DC bankruptcy attorney
Judd’s Judgment: Chapter 7 cases made up 81 percent of the total personal bankruptcies filed in Maryland in 2012.