Do I Still Pay All of My Bills During Bankruptcy?Monday, November 16th, 2020, 2:01 pm
Declaring bankruptcy doesn’t immediately discharge your debts. In fact, bankruptcy court can take months or, in some cases, even a year or more to fully go through your finances and discharge debt. In the meantime, you still have bills piling up. However, the good news is that some of these bills fall under an automatic stay. This means that those creditors cannot continue to ask you for payments or impose penalties on you until your case is finished. Let’s take a look at which bills will be put on hold and which ones you will still need to pay.
You Can Stop Paying on Unsecured Debt
Any debt that is unsecured is automatically paused during your bankruptcy. This means debt that is not attached to one specific asset like a car or a house. For most people, this is credit card debt. You can stop paying this debt, and the lenders will not be allowed to contact you for payments. Medical bills and personal loans also fall into this category.
Continue Paying on Secured Debts if You Want to Keep Your Assets
Secured debts, on the other hand, do not fall under the automatic stay. If you stop paying on your auto loan, the lender can still seek to repossess the vehicle. You will be protected from foreclosure if you stop paying your mortgage, but the lender can begin the foreclosure process after your bankruptcy case is complete if you do not keep up with those payments. If you rent, you likewise cannot be evicted during bankruptcy, but you can be after it’s complete.
Non-Dischargeable Debt Continues
Some debts are not eligible to be discharged through bankruptcy. These debts include student loans, taxes, alimony, and child support. You should continue paying these debts if you are able. If you are in default already, you will continue to incur penalties, late fees, and interest during your bankruptcy. Contacting these lenders and explaining your financial situation may give you some options for deferments and other arrangements. Note that any wage garnishment for child support and other court-ordered payments will continue as normal.
Pay Your Utilities
Utilities and other living expenses are bills for services rendered, not debt. If you stop paying these bills, your utility companies may be able to cut off your services. There are some special options available if you are behind on these payments, but overall, you need to continue making them.
Have questions about what to continue paying during bankruptcy? Contact the team here a Michael F. Kanzer & Associates for answers.