Why Should You Even Pay Your Creditors?
If you are going to file for bankruptcy in the future, you may wonder why should you even continue to pay your creditors? Well, you shouldn’t. Many people, before filing for bankruptcy, stop paying their creditors and use that money they otherwise would have sent to them to file for bankruptcy and get a bankruptcy attorney. This is a common practice and seen as perfectly acceptable. However, when you foresee bankruptcy in your future, but don’t quite know when, you may wonder when it the right time to stop paying your debt.
The question of when is the right moment to stop paying everything is actually legal advice. It is different depending on a person’s specific situation. This article is meant to give some basic guidelines, but is not legal advice and is no substitute for sitting down with an attorney and discussing your financial situation. Luckily, Walker & Walker offers free consultations for anyone in Minnesota who is considering bankruptcy.
When you officially file for bankruptcy, an automatic stay is put in place. This means your creditors can’t collect debt from you and can’t take action like foreclosure or cut off service. This can help in making the decision on when to stop paying your debt to save up money for bankruptcy. However, there are essentially two other factors that will help you with that decision.
When Will You File?
Ideally, you will want to have a bankruptcy time frame in mind before you stop paying any debt. You can usually consult with a bankruptcy attorney for free to see if you qualify for bankruptcy and how it would play out for you. In order to file Chapter 7 bankruptcy, you need to pass the means test while Chapter 13 is a repayment plan that simply requires you to have income to form a repayment plan. You will want to have a set date when you will file in order to avoid costly late fees if you end up not even doing it.
Late fees and interest on loans, credit cards, and medical bills are discharged in bankruptcy just like the the loan or medical debt itself. Chapter 7, the most common type of bankruptcy in Minnesota, discharges all of those types of debts whether they are ten thousand dollars or ten million dollars. Discharge means that you simply stop owing the debt.
What Sort of Bills Do You Have?
Not all bills are created equal. There are some that you can get away with not paying much longer than others. For example, your utility bills will want to be the very last thing you stop paying, if you stop paying them at all before bankruptcy. You need to keep the lights on and even a few months late will result in shut off. Alternatively, that wild credit card bill can fall to the wayside early on. As it is an unsecured debt, as in a debt with no physical asset that can be revoked, it is often seen as a waste to keep paying credit card debt if you intend to file bankruptcy.
For secured debt, like payments on a car or a house, you will want to keep paying this debt. You will not have to pay during the automatic stay of bankruptcy, but you will have to continue paying after bankruptcy if you wish to keep the property. In a similar respect, you will also have to continue to pay items like child or spousal support as well. These cannot be wiped out by bankruptcy and letting yourself fall into a hole of missed payments can be difficult to get out of.
The thing to keep in mind when choosing which bills to pay is if something physical can be lost by not paying it. Not paying a credit card or a medical bill will wreck your credit score, but nothing can be taken away by not paying it. Alternatively, a bank can foreclose against you for not paying a mortgage or your electricity can be shut off by not paying the bill.
Need Help? Contact Walker & Walker Today!
Are you being swarmed by overwhelming debt? Bankruptcy can be the answer to escaping that hopeless situation. Even if you don’t think you have the money to file for bankruptcy, contact us today. We can help you walk through the process and advise you on what bills you can stop paying and when to stop paying them to start the bankruptcy process. Let the Law Office of Walker & Walker help you get your finances in order again.