Paying Your Mortgage Before Your Credit Cards Can Delay Foreclosure
Not everyone who comes in for their free consultation is ready for to file bankruptcy. For example, if someone has just gotten laid off or is expecting to get laid off, her income might be too high to qualify for a Chapter 7 bankruptcy discharge. If she anticipates being unemployed for several months, she will need to wait to file a Chapter 7 bankruptcy petition. As her income tapers off, she will need to think about how to budget her money while she is waiting for the protections of personal bankruptcy to kick in.
Clients in this situation will often ask me what bills they should or shouldn’t pay during this pre-filing period. While, ultimately, it is up to the client to decide what bills to pay, I encourage them to take a look at their situation from a practical perspective. Obviously, they need to have adequate food for them and their family. Next, if they fail to pay their utilities, they face the possibility of being without electricity, water, and gas. If they don’t pay rent or their mortgage, housing becomes a crisis issue. Further, if they want to file Chapter 7 bankruptcy, that becomes impossible if they are in default on their mortgage. The only way to take care of back payments is in Chapter 13.
After that, if they fail to pay their auto loan, they could end up without transportation. Getting to work or job interviews becomes difficult if not impossible for some.
Usually, what’s left is credit card debt. Of course, there are consequences for not paying. If the creditor doesn’t get paid, it will likely sue and likely end up with judgment. Judgment gives the creditor the ability to garnish wages or bank accounts. On the other hand, if someone is planning on filing bankruptcy in the near future, the question becomes whether it make sense to pay a debt that you plan on discharging.
These are just some of things to consider if you are thinking about personal bankruptcy. A Colorado bankruptcy attorney can guide you through the bankruptcy process and make sure you take advantage of all of its protections.
