Stop Collections with Bankruptcy Automatic Stay

Posted on November 11, 2014 at 7:35am by

If you cower when the phone rings for fear it is a creditor, or tuck the mail away unopened because you are avoiding creditors, it may be the time for you to file for bankruptcy. The day that you file your bankruptcy petition, either under Chapter 7 bankruptcy or Chapter 13 bankruptcy, an automatic stay stops all collection activity from all creditors.

During the pendency of the bankruptcy proceedings, debt collectors must leave you alone. Creditors may not call you, mail you, file or pursue a lawsuit against you or continue foreclosure proceedings on your home. Wage garnishments must be lifted. There are a few exceptions to the rule.

Collection Actions Not Prohibited by the Automatic Stay

There are only a few exceptions to the rule that the stay stops collection actions. The following actions may continue, despite the filing of a bankruptcy petition and the automatic stay:

  • Collection for child support and alimony can continue.
  • Although governmental actions to establish tax liability may continue, collection of tax debts is covered by the stay and attempts to collect tax debt must cease.

Creditors May Petition the Court to Lift the Stay

Although there are provisions for creditors to ask for a court order lifting the stay, their request must meet specific criteria including:

  • The debt is secured. For example, you have property for which they loaned you money to purchase, like your car or your house.
  • The creditor must show there is a good reason to lift the stay.
  • If it is Chapter 13 bankruptcy, the creditor must show the property will not affect the reorganization plan.

Bankruptcy lawyers know how to fight a creditor’s attempt to lift the stay and can help you in stopping foreclosure and wage garnishments as you continue your bankruptcy proceedings.