February 17, 2020

Bankruptcy Stops Collection Calls

Once you’ve chosen to file for bankruptcy, things begin to change quickly. Along with feeling as if you’re on the way to a life that’s not weighed down with unmanageable debt, things should be a little quieter around the house and maybe even at work. That’s because creditors are no longer allowed to contact you about any of those outstanding debts. Here are some basics that you need to know about collection attempts and why they stop once the court has received your bankruptcy petition.

Understanding How an Automatic Stay Works

The automatic stay is an order of the bankruptcy court once the debtor’s petition gets underway. As long as it remains in place, no creditor can attempt any type of collection effort.

The stay typically remains in place until the bankruptcy is discharged or until the court grants what’s known as a lift or exemption to the stay. In the case of a Chapter 7 bankruptcy, the stay will last for the three to five months it takes for the court to complete the discharge. Debtors who file Chapter 13 bankruptcies will enjoy the protection of the automatic stay for the three to five years it takes to complete the process and receive a discharge.

There are some grounds for being exempted from a stay. Obtaining an exemption is difficult and the creditor has the burden of proving why the exemption should be granted. Your bankruptcy lawyer can outline the circumstances that would motivate the court to grant an exemption.

Informing the Creditor That You’ve Filed for Bankruptcy

While the court immediately notifies creditors of the bankruptcy filing and the automatic stay, it could be a few days before the collection calls, emails, and letters stop. If you should receive a collection call, you don’t have to go into any details with the caller. The only thing you should do is inform the caller that you have filed for bankruptcy and possibly offer to provide the name and telephone number of your attorney.

Reputable creditors will stop all attempts to collect on the debt while they verify your filing. Once they have that verification, you will not receive any more calls or letters.

Reporting Creditors Who Ignore the Automatic Stay

If you have a creditor who persists in calling or otherwise contacting you, provide your lawyer with the name and other contact information of the creditor. Should the calls continue, take notes of what is said. Be specific and don’t leave anything out. No matter what the caller says, all you have to do is repeat that you have filed for bankruptcy protection and there’s an automatic stay in place. Turn those notes over to your lawyer, since the continued calls could provide the grounds for filing suit against that creditor.

Keep in mind that most creditors will not hesitate to comply with the automatic stay. Any who violate the stay will have to explain themselves to the court and possibly face legal action. In the meantime, enjoy being able to answer your phone without a sense of dread.