Do I Need to Tell My Creditors When I File for Bankruptcy?

Whether you are thinking about filing for bankruptcy or have recently filed for bankruptcy, you may be wondering if you need to tell your creditors about your bankruptcy plans. Are there any benefits to informing your creditors about your plans to file for bankruptcy or the fact that you have already filed for bankruptcy? Are there any laws that require debtors to alert their creditors about consumer bankruptcy plans or filings? In short, a consumer is never required to get in touch directly with a creditor to alert them to bankruptcy plans or filings. However, it could be helpful in some scenarios to alert a creditor about a bankruptcy case.

If you have questions about your responsibilities as a debtor when you file for bankruptcy, it is important to have an experienced Oak Park bankruptcy lawyer who can assist you throughout your bankruptcy case.

Potential Benefits of Informing Creditors About Bankruptcy Plans Before You File
If you are considering bankruptcy but are also considering whether you may be able to negotiate down some of your debt, you may be able to convince a creditor to negotiate a payoff amount if that creditor knows you are planning to file for bankruptcy. However, there are a couple of issues to consider if negotiating down your debt is your first goal (with bankruptcy as an option only if you cannot negotiate down your debt).

First, creditors likely will not be willing to negotiate your debt unless there is evidence that you are actually considering bankruptcy. If you cannot provide evidence about your financial situation and information related to your bankruptcy plans, your creditors are unlikely to be willing to negotiate the total amount of debt you owe. Moreover, if you are unable to pay off the negotiated amount of debt, you could end up filing for bankruptcy regardless, and it may not be worth the time or effort to negotiate your debt.

Even if you can show that you are legitimately considering bankruptcy, negotiating your debt may not get you to the position you need. If you want to negotiate your debt, you will need to do so with all of your creditors in order to avoid bankruptcy. For example, if only one or two of your creditors are willing to negotiate your debt amount while your other creditors are not, you will likely need to move forward with your bankruptcy case as a result of the debt you owe the creditors who are not willing to negotiate.

Benefits of Informing Your Creditors Once You File: The Automatic Stay
Once you file for bankruptcy, and once your creditors learn that you have filed, the automatic stay will take effect. Under the U.S. Bankruptcy Code, the automatic stay applies as soon as a debtor files a petition for bankruptcy. For consumers, this is true whether you file for Chapter 7 bankruptcy, Chapter 13 bankruptcy, or even Chapter 11 bankruptcy (if you are ineligible for Chapter 7 or 13). The automatic stay prevents creditors from moving forward with any actions against you, including:
  • Attempting to collect on the debt you owe through calls, texts, or other forms of contact;
  • Attempting to repossess property; or
  • Filing a lawsuit against you to obtain the debt you owe.
A creditor can be in violation of U.S. bankruptcy law if it knows you filed for bankruptcy and takes collection action.

Contact a Bankruptcy Lawyer in Oak Park, Illinois
Do you have questions about consumer bankruptcy? An experienced bankruptcy attorney in Oak Park can help. Contact the Emerson Law Firm to learn more.


See Related Blog Posts:

How Elizabeth Warren’s Plan Would Change Bankruptcy Laws
What is an “Injury in Fact” for FDCPA Standing?

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