Which Bills Do I Pay, House or Credit Card?
By Kurt O'Keefe, Attorney at Law on Jun 26, 2007 in Automatic Stay, General Bankruptcy Information, Michigan, Protecting Assets In Bankruptcy
If you do not have enough money to pay all the bills, what do you make your priority? Before filing bankruptcy, it is usually a waste of money to pay unsecured debts like credit cards. Unsecured means no collateral, no property of yours pledged to insure that you will pay the debt. If your car is financed, and the creditor is on the title, that car is collateral, or security, for that debt. If you do not pay, the creditor can repossess the car. If you do not pay your mortgage, the mortgage company can foreclose and take your home.
Filing any chapter of bankruptcy stays any collection efforts, with some exceptions for repeat filers, so foreclosure and repossession would not happen if you file first. However, if you want to keep your house, you should make that payment instead of credit cards.
I know the credit card companies start hassling people faster, calling, and writing, and maybe using collection agencies, usually faster than a mortgage company will foreclose.
The squeaky wheel gets the grease, and people want the annoying calls to stop, so they send money to the creditors instead of to the mortgage company.
But if you use the car payment money to pay VISA, in Michigan, your car can be taken without notice. And late fees and interest accumulate on the mortgage payment, so it ends up costing you more than if you had used the credit card payment money to pay your secured debts.
The automatic stay is only temporary on secured debts. Either after the discharge in a case, or an order lifting the stay, the secured creditor will be able to get its collateral back. In Detroit, the judges will always lift the stay in a Chapter 7 to allow creditors to take back collateral.
When in doubt, check with an attorney. Your best bet will be using your scarce dollars to keep your home and or vehicle rather than send Mastercard a few more dollars.
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