How Does a Chapter 7 Bankruptcy Petition Affect the Obligation to Pay Your Bills?

Can You Use the Automatic Stay to Avoid Paying Any Financial Obligations?

When you file for protection under the American bankruptcy laws, an automatic stay immediately goes into effect, preventing your creditors from calling, writing or taking any legal action (outside of the bankruptcy proceeding) to collect a debt. Does that mean that you can stop paying all bills? Will the automatic stay prevent all your creditors from trying to collect a debt? Unfortunately, no—while the automatic stay can bring a substantial amount of temporary relief from the incessant calls and collection letters, it won’t apply to all your debts.

The Automatic Stay Does Not Apply to Post-Petition Debts

A bankruptcy proceeding only includes those debts that have already been incurred at the time you file. Accordingly, in a Chapter 7 case, you can permanently discharge certain debts, but only to the extent that you owed them at the commencement of your bankruptcy proceeding. Any debt that you take on after you’ve filed will not be a part of that proceeding and will not be covered by the automatic stay. That includes credit card debt, medical bills, utility expenses and rent/housing expenses. If the debt was incurred after you filed your petition, the creditor will still have all legal options available to collect it.

The Chapter 7 Petition Does Not Affect Any Liens on Property

If you have secured obligations, including a car loan or mortgage, for example, you can use a Chapter 7 to discharge your duty to repay the debt, but you can’t use it to wipe out any underlying liens on the property. Accordingly, if you fail to meet your obligations, the lender may have the right to exercise the lien and foreclose on or repossess the property.

Contact Attorney Howard N. Sobel

At the office of Howard N. Sobel, we provide personal bankruptcy counsel to men and women throughout the state of New Jersey. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.

Named a New Jersey SuperLawyer Every Year since 2008, Including 2022