About credit cards

 Long ago I wrote the following post:  

Clients often ask if they should stop paying their credit card bills before we file their bankruptcy case.

There are at least two issues.  The case to continue payments is that there is an argument that the more "lates" you have on your credit report, the lower your credit score will be. 

The counter argument is that if you need to file bankruptcy, you need to be saving your money to, for instance, catch up your home mortgage payments.  Money paid to the credit card company is gone and you are not going to get it back.

There is another "legal" issue, which is as follows:  Bankruptcy trustees are on the lookout for payments to unsecured creditors which exceed $600 per creditor in the 90 days before the case was filed (one year for 'insiders'-- basically, people who are relatives or close friends.)  The reason is that such a payment may be a "preference".  I usually say that there is nothing immoral, illegal or fattening about a preference, but the point from the trustee's standpoint is that he or she can recover the preferential payments and earn a commission for doing so.

So, you don't get the money back and the company you paid doesn't get to keep the money. Sort of a lose-lose proposition.

So, I think as a general matter, once you have decided that you have to file bankruptcy, stop paying the credit cards.

A related question is whether any of your credit cards will still be usable after your case is filed.  My thought is that you should expect your cards to be closed.  Many card companies subscribe to services such as AACER which every day access the bankruptcy court website to see if Social Security number such-and-such filed bankruptcy that day.  AACER then notifies the card company about that filing so that the card company can match that Social Security number to their account number.  Once they match your Social Security number to their account number, they can close your account.

As usual, there are exceptions to every rule;  be sure to ask about your specific question by calling me at 320-252-4473.