One of the factors that drives some people to file for bankruptcy is that they are sick and tired of debt collectors contacting them constantly. The phone calls and letters seem to come at the most inopportune times. While it is sometimes possible to stem these calls by asking them not to contact you or by entering into a payment arrangement, some creditors will continue to harass you.
When you choose to file bankruptcy, the court issues an automatic stay. This is an order that forbids the debt collectors who have accounts included in your bankruptcy from attempting to collect any money from you. If they do try to collect, they can face steep penalties.
The automatic stay does make life easier for the filers, but it also serves to keep all creditors in an even playing field. Since no creditor can ask you for payments, they all have an equal chance of the bankruptcy trustee sending them a payment. This is done based on specific formulas and by following specific guidelines.
The automatic stay will typically last until the bankruptcy is discharged. There are some exceptions to this, such as if a creditor proves that you fraudulently obtained credit. If the stay is lifted, the collection attempts can continue.
When you comply with your requirements to successfully complete the bankruptcy, any balance that is still due upon completion is discharged. The creditor isn’t allowed to try to collect on that balance.
While the automatic stay shouldn’t be the sole reason you file, it is a benefit that’s worth considering. Make sure that you think about all the ways that the filing might impact you so that you can make an informed decision about filing.