Automatic Withdrawals And Bankruptcy
The advent of online financial transactions has changed the way most people shop, pay their bills, and much more. One such financial action is automatic withdrawals. While being able to pay recurring financial expenses via automatic withdrawal from your bank is convenient, a bankruptcy filing could create issues that need to be addressed in a proactive manner. Read on to find out how to handle automatic bank withdrawals once you've filed a chapter 7 bankruptcy.
Understanding Automatic Withdrawals
A consumer can set up an agreement for paying certain bills through either their banking institution or with the creditor directly. Once in place, money is debited without the consumer needing to take action. The benefits to both the consumer and the creditor are obvious. The creditor is assured of on-time and regular payment of a debt and the consumer doesn't have to worry about forgetting to pay or the bill being paid if they are traveling, in the hospital, etc.
Understanding the Automatic Stay
This legal action is a powerful stop sign, or a "stay", that prevents your creditors (anyone you owe money to) from taking certain actions. These actions include:
- Filing suit against you for unpaid bills
- Obtaining a judgment for unpaid financial obligations
- Contacting you about a financial obligation. That contact might be letters, emails, phone calls, etc.
- Sending you financial statements.
The above benefits are automatic once you file your bankruptcy paperwork and are part of all chapter 7 filings.
How the Automatic Stay Affects Automatic Withdrawals
You might not realize it, but the automatic stay also affects some or all of your automatic bank withdrawals. In almost all cases, the creditor will halt all automatic payments to avoid running afoul of the automatic stay. In some instances, you may need to take action to pay certain bills. For example, you might need to contact your mortgage lender or car loan servicing company and ask them to bill you. Once they have your permission to override the automatic stay, you can pay by billing statement until the bankruptcy is complete.
You don't want or need to do that with your credit card obligations, however, since you have no property at stake with unsecured debts. In most cases, automatic withdrawals for utility bills are unaffected by the automatic stay. The most important consideration is to stay on top of your automatic withdrawals and take action when you notice a bill that has not been paid. It is up to you to contact your creditors and find out how to pay them if you want to keep that piece of property.
Speak to your bankruptcy attorney service to learn more.