What Happens To Your Monthly Payments During a Bankruptcy?

When you file a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, each of your creditors and lenders receive notice of the Bankruptcy filing. Federal law states that a creditor holding a pre-bankruptcy obligation is prohibited from taking any action against you to collect on the debt. But what if you want the creditor to get paid?

There is no legal prohibition against making a monthly payment to a creditor. In Chapter 7, for example, you should always pay your monthly car payment and house note. There should not be a problem – right? Well, issues may arise if you have automatic debit payments with the creditor.

Automatic payments are a convenient way to pay your bills. An automatic payment is an arrangement for a specific amount of money to go from your bank account to the recipient's bank account. Automatic payments are useful to pay monthly bills that do not change, such as a monthly car or mortgage payment. Similarly, a direct debit allows the recipient to deduct money out of your bank account to pay your monthly bill. You might authorize a direct debit for an electricity, phone, or credit card bill. Of course, a direct debit could be authorized for most any bill.

Once the Chapter 7 Bankruptcy or Chapter 13 Bankruptcy is filed, your creditors will typically stop any direct debit from your bank account and refuse automatic payments during the course of the Bankruptcy. Why do they do this? They do not want to violate the Bankruptcy injunction (known as the "Automatic Stay"). Violating this Court Order can lead to serious fines and penalties for creditors. While this procedure is done to protect you, it can be frustrating when you want to pay your monthly bill through an automatic bill payment.

The best solution to this problem is to send a check during the Bankruptcy. The creditor cannot take action to collect your debt, but they can always accept your voluntary payment. To ensure the payment is received, it is a good idea to send all payments via certified mail, return receipt requested.

Filing a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy can help cure many financial problems. Nevertheless, the process can be complicated and complications may arise, including automatic bill payments. Be sure you have an experienced guide to avoid unnecessary problems. Call the Law Office of Nicholas R. Westbrook at (713) 893-6204 and schedule your free consultation. We have convenient offices in Houston and the surrounding areas. The road to financial freedom starts here!

HOUSTON BANKRUPTCY HELP - Law Office of Nicholas R. Westbrook

3730 Kirby Drive, Suite 1200, Houston, TX 77098

(713) 893-6204 ‎