It doesn’t take much for someone to get in over their head financially. A particularly lavish holiday season that you couldn’t really afford, deferring basic life expenses by covering them with credit cards or a sudden diagnosis with a serious medical condition could all leave you unable to pay the debts you have. You may not even be able to make minimum monthly payments on your financial obligations.
For some people dealing with significant financial hardship, bankruptcy may be the simplest way to regain control over their income and debt. At the end of the process, bankruptcy results in a discharge of unsecured debts. However, there are bankruptcy protections that go into effect well before the resolution of your case.
As soon as you file your petition for bankruptcy, regardless of what kind of bankruptcy you want, you have the protection of an automatic stay from the aggressive collection efforts of your creditors.
COMPANIES CAN’T COLLECT ON A DEBT INVOLVED IN A PENDING BANKRUPTCY
Once you file bankruptcy, the unsecured debt you currently have is potentially subject to discharge. To protect from underhanded collection activity by companies that want to get their money regardless of the legal protections afforded to consumers, bankruptcy statutes prohibit all collection activity until the resolution of the bankruptcy filing.
The automatic stay on collection activity includes an end to creditor calls, pending lawsuits, foreclosure attempts and repossession efforts. Most of the time, the information about your bankruptcy filing will automatically transmit to the credit bureaus and trickle down to your creditors.
They will stop calling you of their own volition to avoid a violation of federal law. However, some companies don’t update their records frequently enough and may make a collection attempt after you file for bankruptcy.
If a creditor calls you after you file, you want to provide your case information and the date of filing to the creditor and advise them not to contact you again. Providing the documentation in writing to the company can help. The creditors then have the option to go to the creditor meeting with the trustee for your bankruptcy case and advocate for their inclusion in a repayment plan or in their exclusion from the list of discharged debts.
To prove any violations of your rights as someone seeking bankruptcy, maintain a written record of any creditor collection attempts after the bankruptcy. Get the name of the person who called, the company they represent, the debt they want to collect on and any other important information the collection agent offers you. Make a note of the time and date when you received the call.
Generally, companies have 24 hours to update their records. If they continue to attempt to collect on the debt or otherwise violate your automatic stay, you may be able to take action against the company for violating your rights and the protection of the automatic stay.