One of bankruptcy’s best powers is its ability to grant you relief from creditor actions through the legal method known as the Automatic Stay. The automatic stay keeps creditors from contacting you or taking any legal action against you.
For many borrowers, that means you’re not going to write another check to most of your creditors. But there are some instances where you might want to keep making your regular payments, and some instances when you’ll have to.
Keeping the house or the car.
If keeping the house and the car are goals during your bankruptcy then you should continue to make your regular house and car payments. Doing so will not harm your bankruptcy case.
Usually you’ll only be doing this if you’re filing a Chapter 13, as most borrowers who take advantage of Chapter 7 aren’t trying to hold on to secured property. But always ask your lawyer for advice about your specific situation.
See also: What Happens to My House in Bankruptcy?
Your Chapter 13 plan.
Your entire Chapter 13 plan will involve you repaying creditors while the automatic stay remains in effect. The difference here is that you won’t be paying them directly. You’ll be paying the trustee, who will distribute these payments in priority order.
Once your Chapter 13 plan is in place you should only make the payments outlined by the plan.
See also: Understanding the Automatic Stay.
When your creditors successfully secure relief from the stay.
There are some instances where creditors can ask the court to ask them to make an exception in their case in regards to the automatic stay. This is an action taken by holders of secured debts, and sometimes by landlords: it’s not something we usually see for a Visa or MasterCard bill.
They will usually do this if you’re not following the terms of your Chapter 13 plan, if their property is depreciating rapidly, or if the stay is harming them unduly in some way. For example, the reason the landlord might file for relief is you’re continuing to occupy an apartment but you’re not paying rent. The landlord is losing money on that rental every month, and wants to regain the ability to evict you.
As your Pennsylvania bankruptcy lawyers we would of course object to these attempts, and fight for your right to remain protected under the stay.
When you’ve signed a reaffirmation agreement.
If you’re in the middle of a Chapter 7 bankruptcy there will come a point where you will be invited to reaffirm debts. This could be any debt you want to keep for any reason.
Be careful though. Sometimes there are ways to keep your property even without signing the agreement. And sometimes creditors use reaffirmation to try to push you into paying money you could have had discharged. They often do that by presenting you with an agreement that never goes to court, failing to tell you that such agreements must go to court they’re invalid.
Once you sign the agreement you’ll need to continue making monthly payments as normal, because the debt can no longer be discharged, and is no longer protected by the automatic stay. Sometimes you don’t have to sign: the lender will sometimes allow you to retain your home or car by making voluntary payments.
See also: Why Would I Want to Reaffirm a Debt?
Obviously you should only sign one of these agreements, or make any voluntary payments, after having a conversation with your attorney about the implications of doing so.