I Filed Bankruptcy and They Won’t Take My Payments!

electronic payments and bankruptcyWritten by Charleston Bankruptcy Lawyer, Russell A. DeMott

When you file bankruptcy–in South Carolina or anywhere else–lenders usually stop accepting electronic payments.  In my Charleston area bankruptcy firm, I get calls and emails about this regularly.

Don’t panic!

First, 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.

Why?

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 1989 again.  Mail in your payments.  Most creditors will give your 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–easy peasy.

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 lawyer. 

 

 

About

Russell A. DeMott is a bankruptcy lawyer practicing in the Charleston, South Carolina area. He graduated from the University of South Carolina School of Law in 1993. While in law school, Russ served as a law clerk to Robert F. (“Bob”) Anderson in Columbia. Bob Anderson is a Chapter 7 bankruptcy trustee and, according to Bob, has taught Russ everything he knows.

During his clerkship with Bob Anderson, Russ also worked with fellow SC Bankruptcy Blog member Däna Wilkinson who now practices in Spartanburg, South Carolina. Russ still considers Däna a good friend and mentor. Unbeknownst to Bob Anderson, Russ also learned a lot about bankruptcy law from Däna.

Russ also served as a staff editor and the research editor for The South Carolina Law Review during law school.

For the first two years after law school, Russ clerked for the Honorable Harry A. Beach, circuit court judge in Allegan, Michigan. Russ says of Judge Beach: “Judge Beach was the epitome of an outstanding judge. He had both knowledge and wisdom. He treated lawyers and litigants with respect and always tried to be fair to both sides. It was an honor to have started my career as his law clerk. Judge Beach is now retired, and he is deeply missed on the bench. One attorney friend of mine actually cried during her last hearing before Judge Beach. And I’m sure many others have shed tears since his retirement. ”

For the next ten years, Russ practiced in Michigan in the areas of bankruptcy law, family law, criminal defense, and general litigation. As the years went on, Russ practiced more and more bankruptcy law as he gained an outstanding reputation in that area.

In 2005 Russ moved back to South Carolina to settle in the Summerville area. Russ’s wife grew up in Hanahan, South Carolina and most of his wife's family live in the Charleston area. "That can be both good and bad at the same time," Russ says. He officially declined to comment further about his relationship with his in-laws.

Russ has three daughters, three female cats, and a female dog. He is outnumbered. As Russ puts it, “to borrow a line from Jeff Foxworthy, I’m 'swimming in the estrogen ocean.'”

Russ enjoys the challenge of helping clients with their financial struggles. “I view my bankruptcy practice as a way to level the playing field between ordinary citizens—the voters—and Corporate America—the vote buyers. I’m unapologetically on the side of the little guy.”

Russ helps clients file Chapter 7 and Chapter 13 bankruptcy, as well as out-of-court solutions like negotiating with creditors.

Contact Information:
Russell DeMott, Charleston Area Bankruptcy Lawyer
DeMott Law Firm, P.A.
103 Grandview Drive, Suite B
Summerville, South Carolina 29483
(843) 695-0830
(843) 408-4443 (facsimile)
[email protected]


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