If you get behind in paying your bills, harassment from creditors can be very tough to deal with. Creditors will keep sending you more threatening letters. They may begin to file legal papers in attempt to get a judgment. They will call you repeatedly. They may repossess your automobile or your house. Creditors may even send a sheriff around to your house to try to collect what’s due. All these creditor actions can prevent you from thinking about how you really can address your finances.
There is a solution. It’s called an Automatic Stay. The solution is one that the US Bankruptcy Law provides. It applies to residents of Texas and residents across the United States. As soon as you file your bankruptcy petition most credit actions will come to an immediate stop. The moment you file, creditors can’t proceed against you. To proceed, creditors need to get approval from the bankruptcy court.
Which actions stop immediately
- Creditors can’t call you.
- Creditors can’t start or continue any legal actions against you.
- Creditors can’t repossess your assets. This includes your home, your car or your tools.
- Creditors can’t start or continue a foreclosure action.
- Creditors can’t garnish your paycheck.
- Utilities can’t cut off your services
- Collection agencies have to immediately stop trying to collect from you
- Your duties – the obligations of the debtor. The automatic stay doesn’t last forever. Once you file a bankruptcy petition, you need to follow through with the petition. For chapter 7 and chapter 13 bankruptcies you will have to file all the necessary paperwork and attend a meeting before a trustee.
- Chapter 7 bankruptcy is used to eliminate most of your debt. It’s for people who only have minor assets they want to save or no assets. If you comply with the formalities, you should be discharged of most of your unsecured debt such as credit cards and medical bills.
- Chapter 13 bankruptcy is where the debtor files a plan to make payments over a three to five year period. It’s for debtors who have assets they want to save. Chapter 13 is normally used to pay secured creditors at a reasonable pace. Common secured creditors are a mortgage company or a car creditor.
- What the creditors may do. The creditors will review your paperwork. If they think their debt hasn’t been listed properly, they may file their own claim. If they think the plan doesn’t protect them, they may request that the stay be lifted. They have the right to attend the meeting before the trustee, though most creditors don’t. If they have a security interest in your property they may ask for relief from the bankruptcy court. All of this takes time. During this time, you will have the chance to review with a lawyer what should be done. You will have time to breathe.
What happens after the Automatic Stay?
There are some exceptions. For example, a landlord who has an order for eviction may be allowed to proceed despite the bankruptcy petition. Your lawyer can explain these exceptions. Other exceptions include:
- The IRS may still be able to audit you, though the automatic stay should stop their ability to collect
- Child support and paternity actions usually can proceed.
- Criminal proceedings, in most cases, will still proceed
- Most retirement deductions from your check will still proceed.