Does filing for bankruptcy put a stop to creditor actions?

| Apr 13, 2021 | Bankruptcy |

Falling behind on your bills is a stressful experience. You will likely mentally chastise yourself and stress about the gap between what you make and what you owe. You may have trouble sleeping and may experience symptoms similar to depression. As if the punishments you administer to yourself during times of financial hardship weren’t bad enough, you can almost certainly count on your creditors to make things worse.

They will send you letters threatening you of the worst-case scenario if you don’t pay. They might repeatedly call you at home or your place of employment. They can even try reaching out to your friends, family members and neighbors to try to get information about you to collect on the debt. Collection efforts can often take a difficult situation and make it intolerable.

What effect does filing bankruptcy have on those creditor calls and lawsuit threats?

Bankruptcy filings immediately stop collection activity

Will you file for personal bankruptcy, the courts issue an automatic stay that goes into effect immediately. It protects you from collection activity until the courts review your case. The companies trying to get you to pay can no longer call you or send you letters until after your court proceedings. Pending lawsuits will have to stop. Attempts to garnish your wages, foreclose on your house or repossess your vehicle will also stop.

Certain creditors could potentially resume collection activity while your bankruptcy is still in progress. Companies can file adversary proceedings asking for the courts to exclude them from the automatic stay or the discharge in your bankruptcy. Most companies won’t take this drastic step, which means that once you file, you won’t have to worry about answering the phone anymore. 

A successful filing will help you regain control over your finances

An automatic stay is really just a short-term solution to creditor harassment and its impact on your mental health and daily life. It is the discharge that the courts order at the end of your bankruptcy proceedings that will truly help you put this period of financial hardship behind you.

With a discharge, you are freed from your obligation to repay a creditor. They also no longer have the right to make any attempt to collect on that account. Looking at the forms of bankruptcy and your financial situation can be a good first step for someone considering filing for bankruptcy.