What Bills Should I Pay Once I Decide to File Bankruptcy

NO NEED TO PAY UNSECURED CREDITORS BEFORE BANKRUPTCY

A common question asked by clients is should I continue to pay my bills now that I have decided to file bankruptcy. The answer depends on several factors:

Most unsecured creditors should not continue to be paid after the decision is made to file. Those creditors will not receive anything from the bankruptcy in most cases and there is normally not a good reason to treat one creditor better than another. If the client is seeking bankruptcy relief the clients needs the funds and once the decision is made to file bankruptcy there is no good reason to throw money away.

ALL CREDIT CARDS BILLS NEEDS TO BE INCLUDED IN BANKRUPTCY

Many clients want to know if they can keep some of the credit cards. Not include them in the bankruptcy. This is definitely not allowed. Bankruptcy requires that you list all persons you owe in the schedules and those documents are signed under penalty of perjury. The only way to not list the creditor is to pay him off before the bankruptcy is filed. For non-family members or insiders the payment cannot exceed $600 in the aggregate in the 90 days before the case is filed or the creditor will have the potential of having the trustee ask for the money back as a preferential transfer. For family members or insiders the money can be recovered for payments that were made within a year.

Even if the entire credit card is paid off before the filing the credit card companies will in most cases figure out that the client filed a bankruptcy and will cancel the line of credit. There is therefore little benefit to paying off or making any payments on credit cards or unsecured debts just before the case is filed.

PAY FOR THINGS YOU WANT TO KEEP

Sometimes the answer will depend on the type of debt that is being repaid. For example if the client plans to keep your car or home the client will most certainly want to remain current with your monthly payments. These loans are protected by assets (Real estate or car) and therefore are unlikely to be treated as preferential transfers. If you do not stay current the creditor will be entitled to repossess or foreclose and sell them. If you plan on surrendering the car or house then there is little benefit to making the payments.

OLD TAXES, SUPPORT OBLIGATIONS IN BANKRUPTCY

Some unsecured debts have special treatment in a bankruptcy and can be paid. Income taxes that were first due less than 3 years before the bankruptcy was filed will not be discharged by the bankruptcy and are also entitled to special treatment ahead of other unsecured creditors. If they are paid they will probably not be preferences and since they will survive the filing there is no harm if they are paid. Child support, alimony, and other support obligations must be paid. The Chapter 7 bankruptcy filing has no effect on these obligations.

CONTACT MARYLAND BANKRUPTCY ATTORNEY

One important area of pre-bankruptcy planning involves the analysis and treatment of creditors before the case is filed. In many cases with proper planning the debtor is able to retain significant cash or repay obligations that would survive bankruptcy. When you have come to the decision that filing for bankruptcy is the right move for you, contact Maryland bankruptcy attorney at Broumas Law Group for help with the planning that is needed before a case is filed.