The creditors to whom you owe money can be relentless in trying to collect. Although the law does impose some restrictions to prevent collection activities from reaching the level of harassment, you may nevertheless be bothered by calls on a daily basis at the very least. One of the benefits of filing for bankruptcy is that it puts a hold on these types of activities, buying you some time in the process.
What Sorts of Collection Activities Do Creditors Engage In?
In addition to frequent calls, creditors can also take other, more invasive steps to try to collect what you owe. If you own property and are late with your mortgage payments, your lender can initiate proceedings to foreclose on the property. This means that it can remove you from your home and take possession of it. If you have an outstanding car loan, the lender can repossess this as well. Failure to pay your utility bills can lead to your services being cut off. Some creditors have the authority to take money directly from your bank account or garnish your wages. Filing for bankruptcy puts a stop to these activities, at least temporarily. Some may resume after your discharge, but by that time you may be in a better position to work out an alternative plan with your creditors.
How Does Bankruptcy Put a Stop to Collection Activities?
When you file for bankruptcy, an automatic stay goes into effect. This is a court order that tells your creditors to stop engaging in any collection activities or contacting you by any means at all. The court notifies your creditors of the automatic stay by mail. This means that it can take a few days until they get the notice, or sometimes up to a week.
Between the time that the court sends out the notice of the temporary stay and the creditors receive it, they may still attempt collection activities against you. However, you can put a stop to this by informing your creditors that you have filed for bankruptcy and providing them with the case number. This appears at the top of your bankruptcy petition. Once the creditors have it, they can verify the automatic stay with the court. From this point on, the creditors must work with the bankruptcy court rather than contacting you directly.
The automatic stay remains in effect until either the case is closed or the court removes it. Until that time, it protects you from creditors. A bankruptcy lawyer in Waterbury, CT can explain more about the bankruptcy process to you. Contact a law office to schedule a consultation.
Thanks to The Law Offices of Ronald I. Chorches for their insight into bankruptcy law and how filing can help with creditors.