There are a number of things that are important to understand about paying bills after filing for bankruptcy. Here are a few quick things you need to know:
- Not all debts are discharged (erased) in bankruptcy. You must pay back nondischargeable debts after your bankruptcy case is over.
- As soon as you file for bankruptcy, all collection action must stop. This means that your creditors will stop sending you bills and monthly statements. If you plan to keep your house or car, you need to continue making the monthly payments during and after bankruptcy.
- If you file for Chapter 13, certain of your debts will be paid within the plan and certain other debts must be paid outside of the plan, directly to the creditor. For example, your mortgage, rent, and car payments are typically paid outside of the plan as they become due each month. While typically mortgage arrears and missed car payments from before you filed are paid within the plan.
- Liens survive bankruptcy unless there is a court order stating otherwise. This means if you want to keep your house or car, you must continue to make the on-time monthly payments during and after bankruptcy to avoid foreclosure or repossession.
Paying Back Nondischargeable Debts
Not all debts are treated the same under bankruptcy law. Certain debts are “nondischargeable,” meaning they cannot be erased through bankruptcy. Even after a successful bankruptcy you remain legally obligated to pay back your nondischargeable debts. Common nondischargeable debts include back spousal or child support payments, student loans, and recent tax obligations.
Depending on the facts of your case, you may have other nondischargeable debts. Make sure you know which of your debts are dischargeable and which are nondischargeable. If you have questions, talk to your bankruptcy attorney.
Paying Monthly Bills Even If You Do Not Receive a Statement
Once you file for bankruptcy it is likely that you will not receive monthly statements, even from the secured creditors you plan to continue to pay.
Your bankruptcy discharge order will erase your personal liability for dischargeable debts, but it will not erase any lien associated with the debt.
- This means that after bankruptcy you will not be personally liable to pay back your mortgage, but the lien will still be attached to the house, so if you do not pay your mortgage the lender retains the right to foreclose on the property.
- After bankruptcy, you will not be personally liable to pay back a car loan (unless you sign a Reaffirmation Agreement), but the car will still have a lien, so if you do not make your car payment the lender has the right to repossess the vehicle.
If you want to keep your home or car, you must make your monthly payments even if you are not receiving monthly statements. After you file for bankruptcy your bank will likely terminate automatic payment arrangements and possibly access to online banking.
It will be up to you to pay the correct amount each month, keep a record of having paid, and monitor your accounts to make sure the debt is getting paid, and the lender is properly applying your payments to your account.
Know What Debts Are Being Paid By Your Chapter 13 Plan Payments and Which Are Not
As we mentioned above, certain of your debts will be paid within your plan and other debts you are responsible for paying directly to the creditor each month.
Read and understand your Chapter 13 bankruptcy plan.
Generally speaking, mortgage arrears or missed car payments from before your bankruptcy case was filed will be paid within the plan. You will send a monthly plan payment to the trustee each month, and he or she will pay your creditors who are to be paid within the plan.
Monthly mortgage and car payments that become due each month are typically paid outside of the plan. Most Chapter 13 debtors pay their monthly mortgage and car payments directly to the lenders during bankruptcy. Even if you are not receiving monthly statements, do not assume that the debt is being taken care of or that you do not have to pay it. If you want to retain your house or car, you must make the monthly payments.
A caveat to this is that if your Chapter 13 bankruptcy provides for a lien strip of an underwater second mortgage then you do not have to pay the monthly payments on your second mortgage.
Understand that every bankruptcy case is different. Speak with your bankruptcy attorney to understand which of your debts are being paid by the plan and which are not.
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