What is life like after I file bankruptcy?
Bankruptcy has a lot of stigmas, one of which is that bankruptcy changes the way you have to live your life. I often get asked what will I able to do after I file, is the court going to tell me what I can and cannot do with my money. This article will address what your life will be like after you file bankruptcy and what it is like after you receive your discharge.
First it is important to remember as you read this article that bankruptcy is not meant to change the way you live your life. The point of the bankruptcy code is to facilitate a process that leads to a debtor receiving a fresh start; it is not designed to be a punishment. You will have the power to make all the same decisions you did before you filed bankruptcy, but some of those decisions have added steps.
While you are in an active bankruptcy you CAN do the following without speaking with your attorney and the court will not be involved
– deposit and withdraw money from your bank account
– pay your normal rent and/or mortgage payment
– pay your vehicle payment (as long as you did not include your vehicle in your chapter 13)
– pay your utility/cable
– grocery shop (and buy what you want)
– use your debit card for purchases at retail stores / restaurants
– give money to your church or charity of your choice
– give money to family or friends as you see fit
You are able to spend money as you choose as long as it is a cash exchange meaning you have the money and are not taking on debt. So things you CANNOT do while in an active bankruptcy
– use credit cards
– take out payday loans, cash advances, or the like
– take items to the pawn shop
– apply for credit cards
You cannot take on debt while you are in an active bankruptcy; you filed bankruptcy to get a fresh start so the court will not allow you to incur more debt because it will continue the cycle that your bankruptcy is ending.
While in an active bankruptcy you can ask the court for permission to take on debt for the following:
– purchase a new vehicle
– purchase a house
– take on trade debt for a business expense
– use a corporate credit card for travel as long as the company reimburses the expenses at 100%
Many clients are sued by credit card companies and other creditors prior to filing bankruptcy. All of those lawsuits are stopped by the filing of bankruptcy and they cannot be restarted after the filing, the lawsuit is stopped forever. Once you receive your discharge you can never be sued for that debt again.
The only court proceeding that can continue while you are in an active bankruptcy are criminal matters and child support matters.
If you needed to sue a person or business, or a person or business wanted to sue you, the court must give permission and your attorney would have to file a motion to allow it. Obviously, your attorney would never allow a credit card company to sue you while you are in an active bankruptcy. This situation mostly applies to couples that want to divorce while in an active bankruptcy.
The best way to know what you can and cannot do is to talk with your attorney. Herrin & Wright is committed to keeping an open line of communication. One of the biggest aspects of going through this process with us is to teach you how to have a productive relationship with your money. Budgeting is a learned skill and you can never learn to use your money to fit your needs if you do not ask questions; therefore, we want clients to call our office and ask what they can do with their money so we can discuss if it makes sense and is a good decision.
Along with learning from your attorney, the court requires all debtors to take an educational course about budgeting before their discharge is granted.
Life after bankruptcy is restored to the way it was before you filed. The court is not involved in your life or your financial decisions. You are free to use your money for any reason you see fit. The goal of your financial life after your discharge is to never repeat the patterns that lead to you having to file bankruptcy. You should work with your attorney to rebuild your credit and you should continue to follow your attorney’s guidance regarding your budget because hopefully while in your bankruptcy you became a master at living within your means and do not need credit in order to live the life you want.