Automatic payments are a convenient way to pay your bills. An automatic payment is an arrangement for a specific amount of money to go from your bank account to the recipient's bank account. Automatic payments are useful to pay monthly bills that do not change, like a monthly car or mortgage payment.
A direct debit is an agreement that the recipient can take money out of your account to pay your bill. You might authorize a direct debit for an electricity, phone, or credit card bill. Of course, a direct debit could be authorized for most any bill.
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When you file for federal bankruptcy protection, the bankruptcy court automatically issues a temporary injunction called the automatic stay. This court order prohibits most of your creditors from taking any action to collect a debt from you. The automatic stay is very broad and applies to most creditors; even the ones that you want to continue paying.
Because of the automatic stay, creditors will routinely stop any direct debit of your bank account and refuse automatic payments. The purpose of this refusal is to remain in compliance with the court order and avoid further entanglement with the debtor's bankruptcy case. This can be frustrating to the debtor who wants to pay a monthly mortgage payment or car loan bill.
The answer to this problem is simple: mail your payment to the creditor. Remember, the automatic stay prohibits a creditor from collecting on a debt, not accepting a voluntary payment. It is good practice to maintain good records of all payments made to secured creditors (mortgage and car companies) during your bankruptcy. Your check may not be cashed for weeks while your lender forwards the payment to another department now handling your loan (e.g. bankruptcy department). By sending your payment via registered mail, you will have a receipt of timely payment, regardless when the check is cashed.
Of course, if you wish to stop paying a bill once your bankruptcy is filed, you must notify your bank and revoke the authorization to auto-debit. Your attorney can assist you with this, but it is good practice to submit your revocation to the bank as soon as possible.
The bankruptcy process provides quick and powerful relief when you have the help of an experienced guide. An experienced bankruptcy attorney knows how the laws and common practices will affect your case, and will lead you to a fresh start without complications.
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