Many of those considering filing bankruptcy often question if they should inform their creditors prior to filing.
Like most answers about filing bankruptcy, the correct answer depends on each individual’s financial circumstances. But, the following is a good rule of thumb.
Telling Creditors before Filing Bankruptcy
Most often, debtors should not let their creditors know they are planning to file for bankruptcy protection. Informing creditors of your intention to file bankruptcy might sometimes lead the creditor to work with you in restructuring your debt. But, ultimately informing them could do more harm than good.
Telling a creditor of your intention to file bankruptcy could cause them to speed up their collection efforts. A creditor may fear they will not receive their money from you and could take actions such as
- garnishing your wages
- filing a judgment lien against your property
- foreclosing on your home
- repossessing your vehicle
Just having intentions to file does not offer you any legal protections against these actions from creditors.
Telling Creditors After Filing Bankruptcy
It is not until you actually file a bankruptcy petition that you have protection against creditor harassment and collections.
When you file your bankruptcy petition with the court, the clerk of court or your attorney notifies your creditors. Once a creditor receives notification of your bankruptcy petition, they must, by law, cease contact with you about your debt. They must also stop all actions to collect the debt until your hearing with the bankruptcy court.
A creditor may contact you after you filed if they have not had time to receive the notification from the court. If this happens, give the creditor your bankruptcy case information. If you have a lawyer, give the creditor their contact information so they can direct further communication to them.
Any creditor who contacts you or takes an action against you after receiving notification of your bankruptcy petition could face legal consequences.
Understanding the Best Time to Tell Creditors
If you have concerns about what to tell creditors if you file bankruptcy, it might be time to seek the help of an experienced bankruptcy attorney. An attorney is in the best position to know if filing bankruptcy is beneficial to your financial circumstances and if and when you should inform your creditors.
Do not make this decision on your own. Contact us today for a free evaluation and let us see if our attorneys can help you get a financial fresh start.