Bankruptcy and Creditor Harassment

Filing for Bankruptcy – whether that is Chapter 7, Chapter 11, or Chapter 13 – is intended to give the filer an opportunity for a “breathing spell” from collection efforts by their creditors.    For our clients, this offers a great deal of relief from the constant telephone calls, notices, and, in some cases, pending legal actions, including wage garnishments and bank levies.

After you file for bankruptcy – whether that is Chapter 7, Chapter 11, or Chapter 13 – the automatic stayoffers potent legal protection against bill collectors.  When you file for bankruptcy, the automatic stay immediately stops all efforts by most of your creditors and debt collectors to continue any collection efforts.

This allows an individual, married couple or business filing bankruptcy to stop all collection efforts immediately upon the filing of a bankruptcy case.   Upon the filing of a Petition, notice is made by the Court to all creditors advising of the filing.  Creditors must then immediately cease all collection actions.

Example: At the time a bankruptcy case is filed, a client is scheduled to have his or her wages garnished by a credit card company.    Client files the bankruptcy petition on Wednesday and is scheduled to be paid on Thursday.   The Bankruptcy Code would require that garnishment not to be made from their wages.   Where the garnishment goes through, the funds must be returned to the debtor and the creditor may be subject to sanctions.

Any creditor that intentionally and willfully violates the automatic stay is subject to potential sanctions.  Because any creditor who received notice of the bankruptcy is generally assumed to have acted intentionally and willfully, creditors who attempt in any way to collect debt after the filing of the Bankruptcy Petition may be sued in the Bankruptcy case for damages and may be liable for all attorneys fees that the bankruptcy debtor incurs in bringing the suit.   This is a powerful protection afforded by only bankruptcy law and is one reason that many of our clients have chosen to file bankruptcy when faced with difficult debt issues.

Caution: The Automatic Stay Does Not Apply to Certain Kinds of Debt Example: Child support payments generally cannot be discharged in bankruptcy. This means that a parent who owes child support cannot escape this duty by filing for bankruptcy. Bankruptcies do not act as a stay, or hold, on actions to establish paternity or to establish or modify child support obligations. The relationship between child support and bankruptcy is complex, and you may need the help of an attorney familiar with bankruptcy law. Back child support payments (sometimes called payment “in arrears”) cannot be discharged by filing for bankruptcy, so your ex-husband’s obligations on back child support will remain in place. Debts “in the nature of support” for a child are basically any debts you incurred that relate to your child’s welfare and upbringing, other than debts arising directly from child support payments owed. For example, if you owe debts for medical care that your child received, you will not be able to discharge those in bankruptcy. They will be considered debts “in the nature of support.”

The information set forth above is not legal advice which can be provided to you only after a full review and evaluation by an attorney of your particular circumstances and the remedies which may be available.