The things that lead people to file for bankruptcy can vary, but sometimes the tipping point comes after one too many harassing phone calls from a creditor. One of the most immediate and satisfying aspects of filing chapter 7 is how it handles debt collection actions. To find out more about the protection filers are afforded and what to do when things don't go according to plan, read on.
Meet the Automatic Stay
When you list a creditor on your bankruptcy debt matrix, they are informed of your filing once it hits federal court. All creditors should know, understand, and respect the rules about creditor behavior once a consumer has filed for chapter 7 protection. You are protected in several ways, and among them are creditor contact and actions. Known as the automatic stay, this prohibits creditors from doing any of the following:
- Contacting you by phone, email, text, mail, or in person. Absolutely zero contact is permitted for any reason, no matter how innocent.
- Actions like foreclosures, repossessions, court actions, wage garnishment, and liens must cease at once.
Exceptions to the Rule
Just like all rules, this one has some exceptions. The one that trips many filers up is having creditors continue to make contact with them even after a filing only to realize that they did not list them on the debt matrix. If you failed to list a creditor, they won't necessarily know that you have filed bankruptcy, and they may continue to contact you. Be sure to let the creditor know that you have filed by providing them with your case number. If you failed to include a creditor on the debt matrix, speak to your bankruptcy lawyer immediately.
Other common situations to watch out for include:
- Non-discharged debts – Not all debts can be discharged using chapter 7 bankruptcy. For example, certain tax debts, student loan debts, and back child support debts will remain long after your filing.
- New debts – Once you file, you may gain new debts. While it's not common, some consumers are able to get new credit before the bankruptcy fully processes. That debt is not covered by the automatic stay.
- Reaffirmed debts – You may want to keep paying on some debts. Commonly used with auto loans, debt reaffirmations allow filers to keep the asset covered by the loan as long as they agree to continue paying the loan.
Talk to your bankruptcy attorney to learn more about dealing with creditors after you file for bankruptcy.
