One common myth is that you can stop paying your bills after filing bankruptcy. This is a gross generalization, and it likely springs from constructive legal advice from a seasoned attorney. You see, in a Chapter 7 bankruptcy case, an erase-your-debts-and-start-fresh bankruptcy, debtors are often advised to stop payments on unsecured debts, like credit cards and medical bills. Unsecured debts are discharged at the end of a Chapter 7 bankruptcy case, and paying these debts is just throwing good money away that could be used to help your family get back on its feet. Likewise, it is pointless to continue to pay secured creditors if the debt will be discharged in a Chapter 7 case and the property will be returned to the creditor. While these Chapter 7 situations are common, the application of this “stop payments” advice is narrow.
For instance, if you are keeping your house or car in a Chapter 7 case, you must continue to pay the debt after filing bankruptcy. If you fall behind on payments that come due after the bankruptcy case is filed, your creditor may foreclose or repossess after your case closes. You will receive no protection form the bankruptcy court.
If your case is a Chapter 13, you must continue your payments to secured creditors that arise after your bankruptcy is filed. If you fail to make your “post-petition” house payments, the mortgage company could ask the bankruptcy court for permission to foreclose. Equally important are insurance payments. If you fail to keep your secured property insured, the creditor may ask the court for permission to foreclose or repossess. The same is true for post-petition rent payments to a landlord.
Paying your post-petition debts can mean the difference between a successful bankruptcy and an “epic fail.” Some debtors have fallen into the trap of reorganizing their pre-bankruptcy debts, only to lose property because they failed to meet their post-bankruptcy financial obligations.
If you are struggling with debt, speak to an experienced bankruptcy attorney and develop a comprehensive strategy to eliminate unwanted debts and restructure your finances for a better future. Your attorney will explain the federal bankruptcy laws and how you can get a fresh start.