CHAPTER #23 When Do I Stop Paying My Creditors?

Generally, you will stop paying all other creditors, such as charge cards, as soon as you make the decision to file a bankruptcy petition. Whether you are doing a Chapter 7 or a Chapter 13, there are some bills you will always want to pay. These are personal expenses, such as rent, food, school tuition and current utilities.

In a Chapter 7 bankruptcy, generally the only bills other than regular living expenses that you will pay are for mortgages or cars that you want to keep, or for non-dischargeable debts such as government insured student loans or loans or grants from non-profit schools, first due less than 7 years ago. You may also want to pay collateralized loans, such as furniture and electronics purchases.

In a Chapter 13 debt repayment plan, you are proposing to pay your creditors by making one payment to the Chapter 13 trustee, who then divides it up between the creditors. Therefore, you pay no one individually, or "outside the plan," because your Chapter 13 payment pays them. The only creditor that is generally paid "outside" the Chapter 13 Plan is a mortgage on real estate.

If I am representing you, I will advise you on which creditors to continue paying, and which not to. Generally, you never continue paying charge cards and similar debts, but this is a complicated area and is best left to your attorney to advise you.

Problem: Lou and Wendy can pay their car payment this month, but due to higher rent, can't pay their credit cards, or the IRS taxes due for Lou's side jobs from last year.

The Peter Francis Geraci Chapter 7 or 13 Solution: Perhaps they can file a Chapter 13, which may pay all their bills for the same amount as their car payment; the car will be paid for by the Chapter 13 payment, first, before other creditors. They can use the car payment money for their first Chapter 13 payment. Or, they may want to continue making their car payment, stop paying all the credit cards, and just pay down their IRS debt, doing a Chapter 7.