One of the biggest benefits of filing bankruptcy is the automatic stay that goes into effect as soon as the case is filed. It means that your creditors (those you owe a debt) are not allowed to keep asking you for money. But, just because you don’t have to pay your debts after filing bankruptcy, you’ll still have some expenses to pay going forward. This article will explore what kind of bills a person filing Chapter 7 bankruptcy has to pay even after their case is filed.
Your living expenses include things like rent, utilities, cell phone plan, and car insurance. These are all bills you pay for an ongoing service, and not debts you owed when your case was filed. You have to continue to pay these expenses even after your bankruptcy case has been filed.
If you are under a contract, for example for your residential lease or your cell phone, you can elect to “reject” (or cancel) the contract as part of your Chapter 7 filing. In that case, you can stop making payments once your case has been filed. Keep in mind, however, you will still be responsible for paying for services you receive as part of that contract after the case has been filed. If you had a past due balance when the case was filed, you won’t have to worry about paying that off, but you do have to pay for the time you use the service after filing your bankruptcy. In other words, you can’t reject a contract and stop paying the bill while continuing to live in the apartment or use your cell phone plan.
Utilities fall into the same category but merit special discussion because folks sometimes fall behind on their utilities, and have an outstanding balance that is past due when their case is filed. Combine that with the fact that you often don’t get a choice of utility providers and things quickly get confusing.
If you’re current with your utility payments when the case is filed, everything will stay pretty much the same. The utility company may create a new account for you to use for all post-filing invoices and payments. If you were behind when the case was filed, you’ll be required to provide “adequate assurance” to the utility company that you will be able to pay going forward. Most often, this is done through a deposit for your account. This is true even if you paid a deposit before, as the bankruptcy laws allow the utility company to keep that deposit and apply it to your balance as of the filing date.
Whether your car is leased or financed, if you want to keep it, you’ll have to keep making all payments even after your bankruptcy case is filed. If you’re planning on keeping your car, it’s especially important to stay current with your payments. Make sure you know how much your payment is, when it’s due, and where to send it before you file your bankruptcy petition with the court. A lot of lenders will suspend your online account when they are notified about your bankruptcy, even if you have indicated that you want to continue making payments on the debt.
If you’re ready to walk away from your car and give it back, you can stop making payments on your lease or loan immediately after filing your case. The bank won’t be allowed to ask you to pay the debt, which will be discharged as part of your Chapter 7 bankruptcy. They can repossess the car after the automatic stay is lifted or has expired.
Leased or financed furniture or electronics
Similar to you car, if you want to keep personal property that you’re leasing or financing, you’ll have to keep making payments on the loan. If you no longer want to be on the hook for an expensive piece of furniture you can’t really afford, you can stop making the payments.
Credit Cards & Other Unsecured Debts
Credit cards are the classic example of unsecured debt. If you stop paying them, there is no automatic right for the bank to take something from you, like there is with a car loan or mortgage. Once your bankruptcy has been filed, you should immediately stop making credit card payments (if you haven’t already). Since the automatic stay is in effect, the bank can’t call you to let you know that you missed a payment. They’re not even allowed to call once! Nevermind 15 times in a row as they may have been doing before your case was filed. The same is true for personal loans, medical bills, and money you owe to the payday lender down the street.
Tax debts, student loans and other non-dischargeable obligations
Some debts simply can’t be discharged in bankruptcy. Since you will continue to be responsible for paying these debts (including 401k loans), you should continue to pay them throughout your case and even after your discharge has been entered. If you were already in default when your case was filed, and need a moment to get your budget figured out, it’s ok to wait until your discharge has been entered before resuming payments. But, if at all possible, you should try not to fall too far behind on these debts as interest, late fees, and penalties will continue to build up on the account.
Domestic Support Obligations
Domestic support obligations - child support - deserve a special mention in this category. This debt can’t be discharged. Plus, this debt is not subject to the automatic stay. If your wages were getting garnished for child support when your case is filed, that garnishment will continue. The Bankruptcy Code makes a special exception for these obligations. You still have to list the debt, but you should not expect any breathing room when it comes to making payments.
Bankruptcy gives you a fresh start by allowing you to use your hard earned money on necessities, including living expenses, groceries, gas, or health care costs. Generally speaking, you don’t have to keep making payments on a debt once your Chapter 7 bankruptcy has been filed unless the debt is tied to specific property, like a car loan or a mortgage. If you have student loans or other non-dischargeable debts, make sure you start making payments again once your discharge has been entered, even if you fell behind or stopped making payments before filing.
If you need to file Chapter 7 bankruptcy but can’t afford to hire an attorney for it, we may be able to help. Feel free to visit our Learning Center to learn more about how bankruptcy works and take our screener to find out if you’re eligible for our assistance.