You’re strapped for cash and the bills are piling up, so you’ve decided to file for Chapter 7 bankruptcy. Do you have to continue paying down your debt, or can you stop paying your creditors?
Bankruptcy doesn’t eliminate every debt you owe. And for those that remain after discharge, trying to keep up with your payments is in your best interests. However, paying certain bills may be a waste of money if you’re about to file for Chapter 7. Below, we explain how different debts are treated in bankruptcy.
Secured debts, or those backed by collateral, only go away through bankruptcy if you relinquish the property. Car loans fall into this category – which means you can either let your lender take your vehicle and cancel out the debt or to keep making your monthly payments.
Your bankruptcy discharge should clear away all of your credit card debt – if, that is, you don’t max out your cards making luxury purchases or taking cash advances before filing. Knowing this, you should be safe in stopping your credit card payments.
Domestic Support Obligations
Bankruptcy doesn’t put an end to alimony and child support obligations. Those remain your responsibility, so you need to continue making regular payments – and keep in mind, a Chapter 7 discharge can help free up the funds to do so by erasing your other debts.
Like credit cards, unpaid medical bills are typically erased in a bankruptcy discharge. As such, paying them down when you’re planning on filing for Chapter 7 may very well be like throwing money away.
Mortgage loans are secured debts, and your lender has the right to foreclose on your home if you stop paying toward the loan. Therefore, if you want to keep your house after filing for bankruptcy, you’ll need to keep up with your regular mortgage payments.
While you can wipe out unpaid utility bills through bankruptcy, you may want to continue paying for necessary utility services like electricity, gas and water. If you don’t, the utility providers may require a large deposit to continue as a customer.
The best way to determine which bills you can safely stop paying before filing for Chapter 7 bankruptcy is to meet with an experienced local bankruptcy attorney.
At the Law Office of Davis & Jones, P.C., our highly skilled bankruptcy lawyers have been guiding Utah residents down the road to debt relief since 1995. We’d be happy to offer advice and answer your questions about Chapter 7 bankruptcy – and we welcome you to schedule a free, no-obligation consultation.
If you’d like to meet with a member of our legal team to discuss filing for Chapter 7 bankruptcy, contact our Salt Lake City office today.