When do you stop paying debt if you are filing a bankruptcy?

I often have people call on the phone to ask me questions about filing a bankruptcy and somewhere near the end of the call they begin to wonder when they can stop paying their bills if they are filing for bankruptcy.   I know that at some point during the call they have gone from exploring the option of filing a bankruptcy to being committed to filing a bankruptcy.

I am always hesitant to tell people to stop paying their debts on that call.  I want to review paystubs, credit reports, court records, and contracts in many cases before I am comfortable telling someone to stop paying their debts.  I also want to ask a lot of questions about your property and your transactions over the last few years.

All of these questions help me paint a picture of the likely outcome when someone files a bankruptcy case.   Not only am I trying to determine what is important to my clients but also what I think will be important to a bankruptcy trustee and the creditors in the case.  I am trying to set a level of expectation.

If I tell someone to stop paying on their debts and then they are committing to default on them.  Now that may not matter in most cases.  You might already be in default so it does not matter.  In many cases people are calling me before they have defaulted on anything.  They still have a good credit score.  The are still paying their bills.

Once that default occurs they will probably have no other choice but to file a bankruptcy.  It might be possible that when I go over their paperwork I discover something that would encourage me to advise them to not file the bankruptcy for another five months.  I might find they paid a relative back on a debt seven months ago and if they want to avoid a problem in their bankruptcy they need to get down the road a year from that transaction.  After a year that kind of payment cannot be unwound and recovered by the trustee for the benefit of the creditors.

If I have already told them to stop paying on things then they might be forced to file the bankruptcy before the time period can run.  This then puts the transaction with the relative in play in the bankruptcy case and it might even effect what kind of bankruptcy they can do.

I think these kind of issues can sneak up on attorneys and their clients.  This is why I want to take a good look at things before I tell someone to stop paying on their debts.  I often tell people that if they decide to file a case then our office will have the meeting to go over everything with in days to draft the case.  Not weeks, not months….days.  We can then determine if filing is the right choice and what the consequences will be.  Once we have done that I will feel comfortable telling you not to pay on your debts.

If you have questions about bankruptcy in Kansas and what your options are please give us a call.  We will give you a free consultation.  We have offices in Wichita, Topeka, Lawrence, Overland Park, and three offices in Kansas City, Missouri.  We have clients all over the state of Kansas and we are focused on consumer bankruptcy cases.  We look forward to hearing from you.

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