When you file bankruptcy–in San Diego or anywhere else, lenders usually stop accepting electronic payments. In my friends San Diego bankruptcy firm, they get calls and emails about this regularly.
Don’t panic! This doesn’t mean that your mortgage company or auto lender won’t take your payments. It just means that since you filed bankruptcy, the account has been coded for special treatment.
I don’t represent institutional creditors, so I can’t give you a definitive answer. I suspect the reasons for these policies are as follows:
– The creditor does not want to violate the automatic stay so it “flags” or “codes” the account for special treatment.
– If the creditor is debiting the borrower’s bank account, that could be construed–although done with the borrower’s permission–as a violation of the automatic stay.
– The creditor needs to do other things with the account which require it to be coded or flagged–verify insurance coverage, hire counsel to examine the bankruptcy filing, etc.
What do I do?
Pretend its 1990 again. Mail in your payments. Most creditors will give your bankruptcy attorney a letter with information about making payments. Even if they don’t, just send in your payments by writing out a check and putting it in the mail with proper postage.
What kind of debts or payments are we talking about here?
To be clear, I’m addressing payments to creditors who you want to keep paying–your auto lender, your mortgage company, perhaps the IRS if you have “priority” (non-dischargeable taxes). Keep in mind that you would never continue to pay unsecured creditors (VISA and Master Card) after you file bankruptcy unless specifically advised to do so by your bankruptcy lawyer.
This policy is sometimes irritating and, to some debtors, feels like they are being punished or singled out. But there are reasons for it. If it helps creditors comply with the law, it’s a good thing.
And if you have questions about these issues, call or email your bankruptcy attorney.