Thinking About Filing Bankruptcy? Stop those Automatic Payments.

28 Sep Thinking About Filing Bankruptcy? Stop those Automatic Payments.

I often speak with people who have allowed their mortgage company or a credit card company or two to take a monthly automatic payment from a bank account. This is an easy way to keep up on routine monthly payments, but if you are even remotely contemplating bankruptcy, stop the automatic payments immediately.

The debts on the credit cards will go away in a Chapter 7 or be greatly reduced in a Chapter 13 bankruptcy. Thus, there’s no sense making any more payments. As for the mortgage payment, you’ll probably have to continue to pay that, but the payment may need to be made directly to the trustee in a Chapter 13 bankruptcy, so you’ll have to terminate the automatic payment anyway.

You need to go to the bank to do this. Don’t just call the credit card company and expect that they will take care of it. They might, but it is at least as likely that they will simply “forget.” You’ll be able to eventually recover the money, probably, but it is better not to have to go through the time and effort involved to get it back.

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Douglas Jacobs is a California bankruptcy attorney and partner in the Chico law firm of Jacobs, Anderson, Potter & Chaplin. Since 1988, Mr. Jacobs has taught Constitutional law and Debtor-Creditor/Bankruptcy law at the Cal Northern School of Law. He has served as Dean of Students since 1994. He is a frequent lecturer on the subject of consumer bankruptcy law, and has spoken at both state and national levels.
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