When you are in debt, the constant communication from your creditors and debt collectors can take a toll on your mental health. If you’ve considered your options to help your financial circumstances, you may have decided that filing bankruptcy is in your best interest. Not only can bankruptcy help alleviate debt but it can halt your creditors actions against you through the automatic stay. If you’re unsure what this is or how it can help, you’ll want to keep reading. Additionally, you’ll learn the importance of connecting with an Orange County consumer bankruptcy lawyer.
How Does the Automatic Stay Work?
When you file for bankruptcy, you are automatically granted an automatic stay. Essentially, this means that all creditors must immediately cease collection efforts against you.
Common examples of actions that are prohibited by collectors during bankruptcy include, but are not limited to:
- Filing lawsuits
- Contacting you in regard to the debt
- Continuing a lawsuit that has been previously filed against you
- Foreclosures if you own the property
- Repossessions of vehicles or other property
- Wage garnishment
It’s important to understand that an automatic stay can also undo any actions taken once it’s granted. For example, if your employer has complied with a wage garnishment order, the creditor is required to return the funds. Similarly, if your home is foreclosed and sold but you filed bankruptcy before the sale, it cannot go through and the sale must be reversed.
The automatic stay will last until your bankruptcy case is finalized by the courts.
Can a Creditor Still Attempt Collection?
Unfortunately, even though you are offered protections under the automatic stay, a creditor may technically or willfully violate your rights. A willful violation occurs when the creditor knows you have filed and still attempts collection efforts against you, while a technical violation may occur if they are unaware of the bankruptcy case. For example, if you are sent a letter in the mail two days after filing, this is likely a technical violation as the creditor may have mailed the letter before you filed. If a creditor violates the automatic stay by continuing to take action against you, the creditor can expect penalties like being held in contempt of court or paying damages.
However, there are circumstances where a creditor can file a motion with the court to lift the automatic stay so they may continue pursuing the collection efforts against you. If this occurs and the court grants the creditor permission, they are within their rights to pursue the collection methods outlined in the motion they filed.
Additionally, the automatic stay is not all-encompassing. If you are ordered to pay criminal restitution or alimony to your ex-spouse, these payments are not stopped and you are legally required to continue making payments.
While bankruptcy can help you obtain necessary debt relief, it can be an overwhelming process. As such, it’s in your best interest to seek the guidance of an experienced attorney to help you through filing. At the Law Offices of Michael D. Pinsky, P.C., our team understands the impact debt can have on your life, which is why we will work to help you through this process so you can obtain a financial fresh-start. Contact us today to learn more.
