The decision of when to stop paying your credit cards before filing for bankruptcy is a complex one, and it’s crucial to seek professional guidance from a qualified bankruptcy attorney to ensure you navigate the process correctly.
Here’s a general overview, but remember, this is not a substitute for legal advice:
Arguments for stopping payments:
- Preserving resources: Continuing payments on debts you’ll likely discharge throws good money away. The funds saved can be used for living expenses or bankruptcy filing fees.
- Avoiding further debt: Using credit cards while contemplating bankruptcy digs a deeper financial hole.
Arguments for continuing payments:
- Qualifying for Chapter 7: In some cases, recent large payments could disqualify you from Chapter 7. Your attorney can advise on this risk.
- Maintaining good faith: Judges may look unfavorably on debtors who stopped payments strategically, potentially impacting the discharge of some debts.
- Avoiding legal action: Creditors can sue for unpaid debts before bankruptcy, leading to wage garnishment or asset seizure.
General recommendations:
- Consult a bankruptcy attorney immediately: They can assess your situation, advise on the best course of action, and guide you through the legal process.
- Stop using credit cards: Regardless of payment decisions, avoid incurring further debt you can’t afford.
- Gather financial documents: Organize your income, expenses, and debt statements to prepare for the bankruptcy filing.
Remember, the timing of stopping payments is highly dependent on your specific circumstances. Your attorney will weigh the potential benefits and risks to determine the optimal strategy for your case.
I’m Going To Declare Bankruptcy Soon, Should I Stop Paying My Credit Cards?
It’s important to approach the decision to stop paying credit cards strategically, especially if you are considering filing for bankruptcy. Here are some key considerations:
- Consult a Bankruptcy Attorney: Before making any decisions about your credit card payments, it’s crucial to consult with a bankruptcy attorney. They can provide specific advice based on your financial situation and the type of bankruptcy you’re considering (e.g., Chapter 7 or Chapter 13 in the U.S.).
- Understanding the Impact on Credit Score: Stopping payments on your credit cards will negatively impact your credit score. This impact is in addition to the effect of filing for bankruptcy, which also significantly lowers your credit score.
- Automatic Stay Post-Bankruptcy Filing: Once you file for bankruptcy, an automatic stay goes into effect, which stops most creditors from pursuing debt collection activities. This means that after filing, you generally won’t need to make further payments on debts that will be discharged in the bankruptcy.
- Consider the Timing: The timing of when you stop paying your credit cards can be important. If you stop payments too early, you might face additional fees, increased interest rates, and potential legal action from creditors. On the other hand, continuing to pay debts that will be discharged in bankruptcy might not be financially beneficial.
- Avoid Preferential Payments: Be careful not to make preferential payments (paying off one creditor over others) before filing for bankruptcy, as the bankruptcy trustee might view this unfavorably.
- Non-Dischargeable Debts: Keep in mind that some debts, like student loans, child support, and certain taxes, are not dischargeable in bankruptcy. So, prioritizing these payments might be necessary.
- Financial Planning: Consider your overall financial strategy and how stopping credit card payments fits into this plan. It’s not just about immediate relief but also about long-term financial health.
- Legal and Ethical Considerations: Ethically and legally, there’s an obligation to pay debts. Bankruptcy is a legal tool to help when debts become overwhelming, but it should be approached with an understanding of its seriousness and consequences.
Should I Keep Making Credit Card Payments When Contempating Bankruptcy
Remember, each financial situation is unique, and the decision to stop paying your credit cards should be made with professional advice tailored to your specific circumstances.