As soon as you file for bankruptcy, all collection action against you must stop.
The automatic stay puts an end to collection phone calls, a mailbox stuffed with overdue bills, law suits, wage garnishments, and any other debt collection action against you. The automatic stay is powerful.
The automatic stay is a provision in the U.S. Bankruptcy Code that makes it illegal for creditors to attempt to collect on debts from a person who has filed for bankruptcy protection. There are only a few exceptions to the automatic stay.
The Automatic Stay Begins As Soon As Your Bankruptcy Case Is Filed
As soon as you file for bankruptcy your creditors must stop calling you, billing you, or taking any measures to attempt to collect money from you. Any repossession or foreclosure action must stop immediately as well.
The Automatic Stay Is Effective For the Life Of Your Bankruptcy Case
With few exceptions, the benefits of the automatic stay remain in effect throughout your bankruptcy case. At the conclusion of a successful bankruptcy, you receive a bankruptcy discharge. The bankruptcy discharge is a court order that says your debts are discharged. This means you are no longer personally liable to pay back your debts. Once you have your discharge, your creditors cannot legally attempt to collect any discharged debts from you, and the automatic stay is no longer necessary.
In rare cases the bankruptcy judge will lift the automatic stay at the explicit request of a creditor. In such cases, the creditor must file the appropriate paperwork and you must be given the opportunity to fight it.
Creditors Must Cease and Desist from All Collection Action
The automatic stay is a powerful right granted to debtors. Once you file for bankruptcy protection, your creditors are not allowed to:
- Call you or send you bills
- Garnish wages
- Levy bank accounts
- Sue you for unpaid debts
- Move forward with a pending law suit
- Repossess your car (at least not right away)
- Foreclose on your home (at least not right away)
Exceptions to the Automatic Stay
There are a few rare exceptions to the automatic stay. These exceptions are enumerated by Congress in the U.S. Bankruptcy Code. The automatic stay exceptions include family law proceedings relating to divorce or parenting, collection on ERISA-qualified pension loans, IRS tax audits, demands for tax returns, or assessment of tax liabilities. However, the IRS must cease and desist from collection action for tax debts while the automatic stay is in effect.
The Automatic Stay Does Apply to Co-Debtors In Some Instances
The automatic stay may apply to other people who may have co-signed a loan with you.
If you have a loan or line of credit with someone else, the creditor is not allowed to continue collection action against an individual co-signer without court approval in most instances.
Note that if you file a joint bankruptcy petition with your spouse, the automatic stay will stop tax collection action against both of you. However, if only one spouse files for bankruptcy, collection action by the federal or state government for tax debt may legally continue against the non-filing spouse.
What Happens If A Creditor Violated the Automatic Stay
Any continued collection action against you is a violation of federal law. If you’ve filed for bankruptcy and a creditor continues to attempt collection, or even contacts you to attempt settlement, contact your bankruptcy attorney immediately.
Make sure to keep excellent records of the dates, times, names of people with whom you spoke, and any other evidentiary support. You may be able to make a recovery against a creditor who willfully continues to violate the automatic stay.
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We are here to stop creditor harassment, get you out of debt, and help you gain the financial freedom you deserve. Call us today at (912) 351-9000 or contact us via the web to schedule a free consultation.
The Law Offices of Barbara B. Braziel proudly serve people in Savannah, GA and the surrounding areas.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.