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Can filing for bankruptcy stop my creditors’ collection efforts?

On Behalf of | Nov 19, 2021 | Personal Bankruptcy

It can be stressful to have a creditor bothering you about your debt all the time. And the more creditors you have, the more unbearable their collection efforts become. If this is happening to you, you can stop their tireless pursuit by filing for personal bankruptcy. Doing this triggers the automatic stay, which is an order that prohibits all your creditors from continuing to hunt you for your debts. That way, you can take some weight off your shoulders and time to rearrange your finances.

The automatic stay

The order of automatic stay becomes effective right after a person files for bankruptcy. The automatic stay prohibits creditors from pursuing their debtors until the process of bankruptcy ends. It also protects the debtor from lawsuits and collection proceedings while their bankruptcy case is pending.

Whether you decide to file for Chapter 7 or Chapter 13 bankruptcy, the automatic stay will protect you from lawsuits or collection efforts from all your creditors. The creditors include collection agencies and government entities like the Internal Revenue Service (IRS). Not only will the automatic stay prevent them from pursuing you, but it can also:

  • Stop your wage garnishments
  • Stop your utilities from being disconnected
  • Stop the foreclosure of your home
  • Stop eviction from a landlord

You must know that there are some exceptions to the reliefs of the automatic stay. A debtor’s wage garnishments might continue under automatic stay if they took a loan against their pension. Also, a debtor could face eviction if the landlord issued a wrongful possession judgment against them before they filed for bankruptcy. Another thing that you must keep in mind is that the court can eliminate the protection of the automatic stay if the creditors ask for it.

Important considerations

Creditors can ask the court to lift the automatic stay if they can prove that the stay is not serving its purpose, that is, that the creditor is not using the stay to work out their repayment plan or rearrange their finances. Creditors can also ask for a stay relief if they prove that the debtor won’t be able to pay their debts. If the court approves the lift of the automatic stay, the creditor who asked for the stay will be able to continue with their collection efforts and may take a person’s car or house.

Your rights as a debtor

Filing for bankruptcy may be scary, but it is a good option if you want to stop your creditor’s efforts and have some breathing room to think about your debts. The creditors won’t continue with their collection efforts unless your case is an exception.  If they pursue you after filing for bankruptcy, you may be able to file a lawsuit against them to recover damages. You cannot have so much stress in your life, and you can get the peace of mind you deserve by getting protection under bankruptcy’s automatic stay.