Depending on the type of bankruptcy you file, you will wait a certain amount of time for your bankruptcy to end and for your debts to be discharged. Watch our Duncan Law bankruptcy video above for more information.
These are common questions that many people have about bankruptcy. In an effort to provide you with information we have provided these frequent questions. However, it is important to realize that each state has different rules and these answers are not meant to be legal advice. Contact a bankruptcy attorney to learn more.
Bankruptcy usually includes all debts that are accumulated before the bankruptcy petition is filed with the court. If there are new debts that are incurred after you file for a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, these are known as post-petition debts and cannot be included in your current bankruptcy.
However, if you were to file another bankruptcy later, the new debts could be included in that petition. There are ways that you can amend your petition to add a creditor after the petition has been filed, but you must be able to prove that this debt was accumulated before the petition was filed.
While in a Chapter 13 bankruptcy, you must get permission from the court in order to incur new debt. This is done through a Motion to Incur Debt. You would need to file the motion to incur debt for anything from obtaining a new credit card to buying a new house. Say you were to get a new credit card while in a Chapter 13 and not tell the Trustee about it. The bankruptcy Trustee could find out and you obtaining debt without the court’s permission could cause problems. This could even possibly cause your bankruptcy to be dismissed! If your bankruptcy is kicked out or dismissed you would be responsible for that new debt as well for the debt that was originally included in the bankruptcy. So, be smart and make sure to ask your attorney what you need to do if you believe you left someone off of your bankruptcy.
The bottom line is you typically will not be able to include post-petition debts (debts incurred after your bankruptcy has been filed) in your bankruptcy.
If you lose your job while in an active Chapter 7 bankruptcy or Chapter 13 bankruptcy, it may impact bankruptcy filing. If you are able to obtain unemployment benefits, you may be able to continue to meet your financial obligations. However, the impact of the loss of employment on each type of bankruptcy will vary.
Chapter 7 Bankruptcy
If you are in a Chapter 7 bankruptcy, the loss of a job may impact your ability to pay for a home, an automobile, or other assets. If you are concerned about your ability to continue to pay these debts, you should speak with your attorney about options available to you including surrendering or giving up the assets in your bankruptcy. The last thing you want to happen after completing a Chapter 7 bankruptcy is to have a repossession of an auto or the foreclosure of your home listed on your credit. Often, the auto finance company and the mortgage company will look for you to pay any deficiency balance, the difference between what you owe on the asset and what they sell it for at auction, after the sale of the auto or home. Again, the purpose of the Chapter 7 was to eliminate your debts and give you a fresh start, so a foreclosure or repossession and a deficiency balance is the last thing you need.
Chapter 13 Bankruptcy
If you are in a Chapter 13 bankruptcy, the loss of a job will most likely impact your ability to make payments to the Chapter 13 Trustee. As a result, you should contact your attorney to see if a modification of the Chapter 13 is possible. In some cases, the amount paid to unsecured creditors, including credit cards, medical bills, personal loans, etc., can be reduced. However, this is not always possible. In that case, you may need to consider whether it is in your best interest to surrender or give up an asset in the Chapter 13 bankruptcy. For example, some clients choose to surrender a car in their bankruptcy in order to afford the Chapter 13 payments and retain their home. In other cases, the Chapter 13, regardless of the modifications, is no longer feasible. In that situation, you should speak with your attorney to determine if converting to a Chapter 7 bankruptcy is an option for you. By converting to a Chapter 7 bankruptcy, you would be able to eliminate your responsibility for the majority of your debts. Again, you should speak with your attorney to determine the best option for your situation.
A motion for relief from automatic stay is filed by one of your creditors after the bankruptcy has been filed. It is the legal process of the creditor requesting the court’s permission to proceed with legal action against you. This is filed by secured creditors such as a mortgage company or auto finance company, if you are not making payments to the Chapter 13 bankruptcy Trustee in a Chapter 13 bankruptcy.
If you get behind on your car payment while in Chapter 7 bankruptcy, the finance company may file a Motion for Relief from Automatic Stay requesting that the bankruptcy court allow the finance company to repossess the car. In most Chapter 13 bankruptcy cases, your car payments will be included in your payments to the Chapter 13 bankruptcy Trustee if you are purchasing the vehicle. If you are leasing the vehicle, you will make lease payments directly to the finance company. If you get behind in your payments to the Chapter 13 bankruptcy Trustee or to the finance company for leases, the finance company may file a Motion for Relief from Automatic Stay requesting that the bankruptcy court allow them to repossess the car.
We understand that sometimes after filing bankruptcy different situations come up that may cause you to fall behind on your mortgage payment. It’s important to realize there are a number of consequences that come from falling behind on your bankruptcy. We will look at them depending on which type of bankruptcy you file, a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.
Chapter 7 Bankruptcy:
In a Chapter 7 bankruptcy, one must be current on their mortgage payment at the time of filing and throughout the duration of the bankruptcy in order to keep the house. If you were to fall behind on your mortgage payments there would be two important time periods to consider. In other words, you need to know where you stand in the bankruptcy.
Before the Final Decree (End of Bankruptcy):
If you fall behind on your payment before the bank has received the final decree, the mortgage company could potentially take legal action. The mortgage company may choose to file a Motion for Relief from Automatic Stay. In other words, they would be asking the court for permission to begin foreclosure proceedings on the home. The Motion for Relief from Automatic Stay will likely be granted to the mortgage company unless you are able to bring the payments current by the hearing date.
After the Final Decree (End of Bankruptcy):
If you fall behind on your payment after the Final Decree, then it’s the same as if you haven’t filed bankruptcy. The mortgage company no longer has to ask for permission from the court to begin foreclosure since your bankruptcy is over once the Final Decree is entered. Therefore, the mortgage company would decide when they wanted to begin foreclosure proceedings on the home.
Prevention:
Be aware of when your mortgage payments are due each month and make a valuable effort to make sure they get to your mortgage company on time. It is common in Chapter 7 bankruptcy for the mortgage company to stop sending statements and/or to stop automatic drafts. You should keep an eye on your automatic drafts to be sure your payments are being made on time. Be sure you pay the mortgage payment on time every month, even if you do not receive a bill or a statement.
Chapter 13 Bankruptcy:
What’s important to consider in a Chapter 13 is at what point in the bankruptcy you have fallen behind on your payment.
Not Behind at the Time of Filing Bankruptcy
If you are not behind at the time your Chapter 13 bankruptcy is filed, the mortgage payment will not be included in your monthly payment to the Trustee. This is considered “paying outside of the plan” since it will continue to be paid as a separate payment. You will continue to make a separate payment to the mortgage company only if you are current at the time of filing and throughout the duration of the bankruptcy.
Behind at the Time of Filing Bankruptcy
One reason why people choose to file a Chapter 13 bankruptcy is because they are behind on their mortgage payments and need to get caught up. If you are behind on your mortgage payment at the time of filing, it will be included in your Chapter 13 monthly payment to the bankruptcy Trustee.
Not Behind at the Time of Filing But Later Fall Behind
If you are not behind on your mortgage payment at the time of filing but then fall behind during the bankruptcy, your Chapter 13 monthly payment will increase. The mortgage company is a secured debt and must receive a monthly payment. Therefore if you fall behind it then needs to be included in your Chapter 13 monthly payments. Your monthly payment to the Trustee will increase, because the mortgage company is one of the first creditors to receive payment. The Chapter 13 office will request that the mortgage company be added to your monthly payment, which will increase as a result.
Prevention:
If you are making your mortgage payments “outside of the plan,” or in other words, making separate payments to the mortgage company, be aware of when they are due and be sure the mortgage company receives your payments on time. As we discussed in the Chapter 7 section, it is common for billing statements and/or automatic drafts to be stopped during bankruptcy, so be sure you pay the mortgage payments on time, regardless of whether you receive statements.
Many people who are considering filing Chapter 7 bankruptcy or Chapter 13 bankruptcy are concerned about whether or not their employer will find out about the bankruptcy filing. Usually, employers do not find out about the bankruptcy filing; however, if your employer runs a credit check they will likely find out about your bankruptcy filing.
Your mortgage company has most likely refused your payment because the mortgage company has received notice of the automatic stay that goes into effect as soon as your bankruptcy is filed. They are probably concerned that they will be in violation of this “stay” if they agree to accept a mortgage payment. A lot of the time this can be cleared up with a simple phone call. If they send the payment back, try sending it again certified mail and keep copies of your receipts. This will help prove that you have been trying to make the payments if needed.
You can always contact you bankruptcy attorney’s office. Usually they will contact the mortgage company for you and make it so that they will begin to accept your payments again. Most importantly, if the mortgage company does not accept your payment, do not go and spend that money! You will eventually pay that mortgage payment and the fact that they did not accept it when you tried to make the payment is not a sufficient excuse to no longer have the payment. Put the money that would be going to the mortgage company in your bank account and leave it there until you have cleared up the misunderstanding with the mortgage company.
We also understand that because times are tough, funds are limited. That’s why we set up an Easy Payment Plan with all of our clients for your attorney fees. Through our Easy Payment Plan, YOU set the payment schedule for your attorney fees based on your income and how often you get paid. After you have paid the attorney fees, federal court filing fee, completed and paid the credit counseling fee, submitted the proper paperwork and met with an attorney at Duncan Law, your case will be filed with the Court and you can begin your new financial life.
Thank you for your interest in our firm. We know the decision to pursue bankruptcy was not easy for you. Our goal is to make the process as simple as possible for you and your family. We also want your free consultation to be helpful to you. As a result, we have a list of items for you to bring to your free consultation. Although you are not required to bring every document below, the more information you are able to bring to your consultation, the more precise we can be in determining your eligibility for bankruptcy.
