What bankruptcy filers need to know about the automatic stay
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What bankruptcy filers need to know about the automatic stay

On Behalf of | Jul 15, 2022 | Bankruptcy |

The reason that most people file for bankruptcy is the discharge of their debts. A successful bankruptcy filing leads to a discharge, which means that you no longer have to repay the unsecured debts included in your bankruptcy filing. Your discharge will hope you rework your budget and permanently end stressful and aggressive collection efforts by your creditors.

Although many people focus on the discharge, bankruptcy offers you an important protection from the moment the courts accept your initial filing paperwork. The automatic stay granted in bankruptcy proceedings can be as beneficial as the discharge of your debts for your protection from collection activity.

What is the automatic stay?

The automatic stay is a legal requirement to halt collection activity, including lawsuits, until the courts review the case. An automatic stay goes into effect as soon as someone filed bankruptcy paperwork with the local courts.

You usually won’t need to contact your creditors. The courts themselves will report the bankruptcy filing to the credit bureaus, who will in turn relay that information to credit card companies and other creditors with an interest in your financial circumstances. Most big companies receive electronic information automatically when a Social Security number associated with one of their accounts shows up in the bankruptcy filing records.

However, sometimes, creditors don’t have notice of your bankruptcy filing and will continue calling you or even try filing a lawsuit against you.

What do you do when a company violates your automatic stay?

The first thing you need to do when a creditor violates the automatic stay by pursuing collection activity is to notify them. When they call you at home or serve you with paperwork, you can contact them immediately to notify them of your bankruptcy filing. Providing them with your case information and filing date should be all that is necessary for them to immediately cease collection activity.

However, if they continue to harass you or pursue collection activity without first going to court to get permission to do so, you may be able to take action against your creditor. The law allows you to seek actual damages and possibly punitive damages. Knowing and asserting your rights as someone dealing with unsustainable levels of personal debt can help you make the most out of your upcoming bankruptcy filing.

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