What is “Pre-filing” Versus “Recurring” Debt?

There is no question that most individuals will file bankruptcy because they can no longer meet their monthly financial obligations.

But, while the actual filing provides a “freeze” or “automatic stay” that allows the individual to pause and organize, he or she would not file if those monthly bills didn’t change.  So, that brings us to the question “what bills will I still have to pay?”

First, it is important to understand the difference between a recurring debt and a pre-filing debt.  The best example for a “recurring” debt is a utility bill.  For the most part, your electric bill begins on the 1^st of every month and ends on the 30^th of every month.  The individual pays this bill every month and then incurs the next bill immediately thereafter.  This is the type of bill that you will continue to owe (and pay, if you want to keep the service) every month as you are receiving a service every month.  In some instances, people will owe a balance on a utility bill and this balance may be eliminated in a bankruptcy filing, but that will almost always result in the company in question terminating your service.  Simply, if you don’t pay the electric bill you will lose your electricity.  This applies to car leases, car loans and mortgages.  You may eliminate the debt, but then you will lose the service or, in some cases, the asset.

Pre-filing debt is best illustrated by a credit card.  You used the card to make a purchase and you agreed, in using the card, to pay back that balance over time while incurring interest.  For the purpose of this article we will presume the credit card was used for a purchase more than 12 months before filing.  So, the item purchased was for One Thousand dollars ($1,000.00), one year ago and you are continuing to make payments.  When you file for bankruptcy this will be a “pre-filing” debt.  The debt already exists and you are not receiving a service or maintaining a loan on an asset.  When you file for bankruptcy this debt will be eliminated and you will stop making payments.  In addition, unless certain circumstances apply, you will keep the item you purchased.  Of course, there are circumstances that could require the forfeiture of the asset, but these circumstances only apply in certain situations.  NYBankruptcy.com will discuss all of these situations with you.  Credit card debt can be eliminated in bankruptcy.

Also included in “pre-filing” debt is money owed for services received.  The best illustration for this type of debt is medical bills.  You received the service, your insurance maybe paid for part and now there is the outstanding balance and the threat of collection.  “Service” debt, including medical bills, dental bills, can be eliminated in bankruptcy.

Pre-filing debt also includes bank loans, personal loans, personally guaranteed business loans, civil losses and a great deal more.  Call NYBankruptcy.com today and we will discuss the “recurring” and “pre-filing” debts that you can eliminate and the financial freedom that awaits.