After filing bankruptcy, it’s mainly smooth sailing. But, if you’re not careful, certain actions could jeopardize your discharge or cause you grief down the road. Following these ten Do’s and Don’ts can help protect your discharge and ensure your fresh start!
Do’s After Filing Bankruptcy:
DO continue paying on your car and home (if you plan to keep them). DON’T continue paying debt that will be discharged. This includes credit cards, medical bills, and old utility bills.
DO continue paying HOA fees if you plan to remain in your home. HOA fees incurred before your filing should be discharged, but HOA fees incurred after your filing will need to be kept current – just like your mortgage.
DO adjust your wage withholdings to reduce the taxes taken out of your paycheck. BUT don’t do this if the trustee requested your tax refunds as part of your case (see below). Reducing the amount of withholdings (to their proper level) puts more money in your pocket each pay period.
DO contact your attorney if a creditor continues to collect a debt. It takes about one week for creditors to receive notice of your bankruptcy filing. 99% of creditors will immediately cease collection efforts. But there are a handful that will require special attention through a contempt motion or the filing of a lawsuit within your bankruptcy case. In some cases, you may be able to recover damages for a creditor’s violation of the automatic stay.
DO contact your attorney if you receive an inheritance or windfall within 180 days of your bankruptcy filing. There is a special provision in the Bankruptcy Code which causes inheritances to become property of the bankruptcy estate and placed under the temporary control of the trustee.
Don’ts After Filing Bankruptcy:
DON’T sell or transfer any property without consulting your attorney first. The filing of a bankruptcy case creates a bankruptcy estate which causes all property to temporarily come under the control of a case trustee. Transferring or selling any property before the trustee “abandons” it back to you could result in your discharge being revoked or denied.
DON’T settle any personal injury cases which occurred prior to the bankruptcy filing. Just like personal property, personal injury cases immediately come under the temporary control of the case trustee once the bankruptcy case is filed.
DON’T spend or take a loan against tax refunds. Trustees take a hard look at cases filed in early and late in the year to determine whether any tax refunds become property of the bankruptcy estate. (This is why it’s good planning to file your taxes as soon as possible and spend your tax refunds on necessities before filing.) Spending or taking a loan against a tax refund may result in the trustee filing a motion to revoke your discharge and/or dismiss your case without a discharge.
DON’T be alarmed if your mortgage servicer or auto lender shuts off online access and stops mailing you statements. Upon filing bankruptcy, an “automatic stay” goes into effect. This prohibits creditors from continuing to collect a debt, such as sending statements, collections letters, making phone calls and filing lawsuits. Lenders will temporarily suspend online access and sending statements out of fear of violating the automatic stay. Many times, it just takes a phone call or letter from the attorney authorizing the lender to resume contact in order for the lender to reinstate access. In the meantime, continue making your payments by mail.
DON’T be concerned if some creditors still contact you or send you statements after filing bankruptcy. It typically takes one week for notice of your bankruptcy to reach your creditors. Sometimes, a creditor may not receive the notice before the call is made or the letter went out. If this happens, you can provide the creditor with your case number, date of filing, and your attorney’s name. They should cease contacting you. If they don’t, then the creditor could be subject to sanctions and damages for violating the “automatic stay.”
About Matthew Cree
Matthew Cree is an attorney and counselor at law focusing on bankruptcy and collection defense in Greenwood, Indiana. His philosophy is to be there with his client every step of the way and to make bankruptcy as stress-free as possible.