Creditors are the party that will primarily be affected when you file for bankruptcy. They will no longer be able to initiate or continue with any action of collecting debt from you. So, should you notify them about your decision?
Here is what to know to make informed decisions:
You don’t have to
You are not required to tell your creditors that you are declaring bankruptcy. Once you have filed, the court will notify all the creditors you listed informing them of the filing, the case number and the trustee assigned to your case. Thus, before sending your petition to court, confirm that you have listed all your creditors.
You may choose to
Depending on what you want to achieve, you can tell your creditors you are declaring bankruptcy. If you want to negotiate a settlement or buy more time to catch up on your payments, informing creditors about your plan may be a good idea.
A creditor may be more willing to negotiate a settlement with you if they know you might be filing for bankruptcy sooner since they don’t want to end up with nothing. Further, a creditor may put you in a program that allows you to catch up on payments, eliminating the need for declaring bankruptcy.
However, you need to be honest about your reason for notifying a creditor if you want this move to advantage you. Telling your creditors you are filing for bankruptcy as a “threat,” hoping they will stop payments, may be unwise. In fact, they may quicken their tactics of collection before you file. Only a valid case number can stop collection.
Whether or not you should notify your creditors about filing for bankruptcy depends on your case. Get legal help to determine the most suitable option for you.