What are the repercussions for stopping payment on your credit cards months before filing Chapter 7 bankruptcy?

Once you have decided that you are going to file a chapter 7, and if you have met with an attorney who has run the numbers and determined that you are eligible for a chapter 7 discharge pursuant to the "means test", then you are throwing money down the toilet to pay any unsecured debt. Pay only your car payments, if you have one and want to keep the car, or any other secured debt for items you need or want. The reason I say this is that the debt will be discharged anyhow under the bankruptcy, and so whether you pay or not is of no consequence. This answer is offered for informational purposes only. It is not offered as, and does not constitute, legal advice. Laws vary widely from state to state. You should rely only on the advice given to you during a personal consultation by a local attorney who is thoroughly familiar with state laws and the area of practice in which your concern lies.

The following information should not be taken as legal advice but simply as information based upon general principles of law, which is intended to educate. As such, this information is not intended, nor should it be construed as creating any attorney/client relationship. If you need specific legal advice, please consult with a lawyer of your choosing. If you are serious about filing a Bankruptcy Petition and have consulted with an attorney to verify that you qualify for a Chapter 7 case pursuant to the Means Test, you would be wasting money to pay unsecured debts that would be discharged in the bankruptcy. You do need to continue to make payments on any secured debt you might have, i.e.: house, car, etc. Secured debts are not generally discharged in a Chapter 7 case, assuming that you are keeping the property that secures the debt rather than turning it over to the Trustee to sell for the benefit of the creditors. As to the ramifications for not paying the credit cards for 90 days, you can expect that the credit card companies will charge late fees and raise the interest rate, however, if you go through with the Bankruptcy and the debts are discharged, all the added fees and interest will be discharged as well. At some point in time, the credit card companies will cancel the cards and turn the account over to a collection agency. They will attempt to collect the debt from you. Once the Bankruptcy Petition is filed, however, the automatic stay prevents them from contacting you further or from taking any further collection activities against you. If you wait too long, the credit card company could file a lawsuit against you, however, so long as you respond promptly and avoid a default judgment, the automatic stay that is effective on the filing of the Bankruptcy Petition will stop that case as well.

My colleagues' responses are very good. IF you have determined that you ARE going to be filing for bankruptcy, then STOP making payments on credit card obligations that are not secured [more on that later]. Pay only car payments or non-credit-card secured transactions, meaning there is no collateral. You do NOT get a "gold star" on your credit report to show that you paid faithfully until you filed for bankruptcy. There MAY be credit card purchases that you would want to continue to pay--MAYBE. Example, you bought a computer at Best Buy using their credit card. Well, most folks do not realize it but the language of the agreement when you use their card imposes a lien on the computer. Same for Rooms to Go, Ashley Furniture, even Sears when you buy a high ticket item like a riding lawn-mower. Well, if you ABSOLUTELY have to keep that item, you would want to consider paying that card. The bankruptcy code gives you 3 options when you have a secured debt: 1) surrender the property; 2) redeem the property, which means paying, in a lump sum, the value of the property; and 3) reaffirming the debt, which means you get to keep the property as long as you pay according to the contract. OR, you can do nothing and see if the creditor tries to enforce those 3 requirements, which means hiring an attorney and going to Court. Lets face it, GEMB/Best Buy or HSBC or any of the others--they are NOT interested in taking back that 2 year old computer or 1 year old printer or 4 year old couch. The time, hassle and expense for them to do that is not worth what they could get for the item selling it as "used". So, their pressure is the convenience factor. My advise--reaffirming the $2,400.00 balance on a 2-year old computer system makes no sense at all when you realize you can buy a brand-spanking new system for about $900 which would be faster, better, and full of the most recent software. Or paying $3500 on a balance on furniture when you could probably buy the same item(s) slightly used for a third of the amount. So, to answer your question--the repercussions of not paying the credit cards while you wait out the 90-day preferential payment period will be phone calls and letters, and if some of those cards are secured by the collateral the possibility that the creditor will demand to take possession of the the collateral Good luck to you..