One of the most disheartening things that people with debts have to deal with is creditors making collection attempts. This can lead to a dread of answering the phone or checking the mail. When you realize that you simply can’t cover the debts you have, you may decide that you’re going to file for bankruptcy.
When you file for bankruptcy, the court issues an automatic stay. This prevents creditors from being able to contact you to collect on the debts that are part of the bankruptcy proceedings.
Why would the court issue an automatic stay?
It’s highly unlikely that creditors will receive full payment for the accounts that are included in the bankruptcy. The automatic stay ensures that no creditor is unjustly put before others when it comes to repayment. All creditors must be paid in accordance with the law, which includes a specific priority order when the case is filed.
There are some instances in which a creditor can petition the court to lift the automatic stay. This is the case when there’s a chance the debtor’s assets are likely going to depreciate before the bankruptcy is finalized. Lifting the automatic stay requires the court’s approval, so creditors can’t make the decision on their own.
Anyone who’s going through a bankruptcy case should ensure they learn their rights. Creditors who continue to try to collect money from you are likely breaking the law. Your bankruptcy team can help you to address the issue of a creditor violating an automatic stay. This is best done as soon as they initiate the collection attempts.
