Credit Cards

Can I stop paying credit cards before bankruptcy?

The decision to file for bankruptcy can be difficult both emotionally and financially. There are long-term repercussions to your credit. However, it is possible to stop your credit card payments before you file for bankruptcy, and use that money to catch up on house or car payments. This increases your chances of being able to keep these items once you do file. Stopping your credit card payments is easy, but stopping the subsequent harassment can be more difficult.

Once you stop paying your credit card, stop using it. If your credit card was issued by a Credit Union or a small local bank, you will want to close any savings account or checking account you have with that financial institution. Why? Credit Unions and small local banks typically have “set off” provisions in their Card Holder Agreements which means if you don’t make your minimum monthly payment on the credit card, they can take the minimum monthly credit card payment out of your checking or savings account.

Once you stop paying, the credit card company can either: (1) sell your account to a collection agency or (2) file suit against you. If they sell your account to a collection agency the phone calls from 8am to 9pm all day, every day continue. If they file suit against you the legal battle begins. Interest and legal fees build the balance owed. Taking time off from work to fight the case becomes expensive. Eventually the creditor will get a judgment, garnish paychecks, freeze any funds in bank accounts or file a lien against your home.

Bankruptcy law is black and white. Once you file for bankruptcy, all collection proceedings end entirely. Chapter 7 or Chapter 13 can be filed depending on the facts of your situation.