Preparing for Bankruptcy: Voluntarily Closing Credit Accounts
If you feel you are considering preparing for bankruptcy, you should read testimonials submitted by other bankruptcy petitioners. You should also read material regarding the process of bankruptcy. You should know who the bankruptcy trustee is and what their job is in relation to your bankruptcy case. You should know all of your creditors, inside and out. You should stop spending any “credit.” You should learn to shop from cash on hand (or in your bank account). There are a lot of things you can do in order to prepare yourself for the “jolt” of bankruptcy and there is one thing you should not do: voluntarily close certain credit accounts in hopes of “saving” that credit from your bankruptcy.
You CANNOT save any of your credit accounts from the effects of filing for bankruptcy. Closing a credit card account with a balance voluntarily in order to save it is pointless. You cannot pick and choose creditors that will be listed in your bankruptcy. The list of creditors submitted for your bankruptcy petition MUST be complete. You must list EVERY debt even if you already know that it will not be discharged (i.e. student loans, delinquent alimony/child support, criminal restitution, delinquent income taxes, etc.) Auto loans, furniture/jewelry loans, mortgage loans, etc. will all need to be listed even though they are secured by collateral and you intend to keep some or all of the debts associated with those particular items. You also MUST list personal loans. Even that $500 your Grandpa forced you to borrow when he accidentally read that NOTICE OF DISCONNECT sitting on your kitchen counter. Your list of creditors needs to be the most complete list you’ve ever created in your entire life.
I see it over and over again: clients attempting to keep one or two specific creditors out of their list of creditors. While I can’t force any of my clients to list any specific creditor/s, I can advise them of what will inevitably happen.
What Inevitably Happens When You DO NOT List a Creditor in Your List of Creditors:
The creditor eventually receives notice of your bankruptcy or discovers it through a regulatory credit check and closes your account or cancels the card. At this point, you will call me. You may even suspect that I listed the account without your permission. (I can assure you before it’s even happened that I did not. I can only enter accounts that are provided to me by the client). Most creditors don’t need to be notified that you filed bankruptcy. Since many payments to creditors are processed through one centralized company (i.e. GE Money Bank, Citibank, Wells Fargo, etc.) one lender’s notification will result in the closing of all the accounts associated with your name – accounts are immediately frozen and closed even if they don’t carry a balance. If they don’t find out through their centralized payment processor, they will eventually (sooner rather than later in most cases) review your credit report for a routine credit line increase or other such promotion. The computer notices the bankruptcy on file, all accounts will be closed automatically.
For answers to all your other questions regarding filing for bankruptcy in southern California, contact the bankruptcy experts at Westgate Law.