How Can a Bankruptcy Stop Collections by Creditors?

If you live in fear of checking your mail or answering your telephone, you are one of the millions of Americans dealing with debt collectors.  Many Americans are unable to pay their bills due to the loss of income from unemployment, a medical injury or the loss of a spouse; however, debt collectors do not consider these situations as valid reasons why you are not paying your bills.  Debt collectors are relentless with their efforts to collect bills even to the point of harassing consumers. There are many people facing the same financial problems and stress that you are facing but there is hope for them and there is hope for you.  Filing a bankruptcy can stop collection actions and put an end to creditor harassment.  You can stop this ongoing nightmare and find the relief that you need to begin with a fresh start through filing a bankruptcy.

I thought that creditors were not allowed to harass consumers

The Fair Debt Collection Practices Act imposes restrictions on debt collectors to prevent creditor harassment; however, these provisions only apply to debt collectors and not the actual creditor itself. Furthermore, you must go through the process of writing to the debt collector to request proof of your debt and to notify the debt collector to stop contacting you. This only stops collections for a brief period until the debt collector provides you evidence of the debt (i.e. copy of the contract, loan agreement or credit application) and then the collection letters will once again resume. Even though you have rights and laws exists to protect you from unfair or deceptive collection practices, it is often difficult to prove damages and stop collection effort by going through a government agency or filing a lawsuit for creditor harassment. In order to stop collection efforts permanently, you need to file a bankruptcy case.

The bankruptcy automatic stay

Under Section 362 of the United States Bankruptcy Code, an automatic stay goes into effect immediately upon the filing of a bankruptcy case.  This automatic stay immediately stops collections from continuing by prohibiting creditors from continuing any efforts to collect a debt.  This includes filing or continuing a lawsuit to collect a debt, foreclosures, repossessions and wage garnishments.  It also ends telephone calls and letters to collect the debt.  The creditor may provide you information about the debt; however, it cannot demand payment or request payment for the debt as long as the automatic stay remains in effect.

The automatic stay remains in effect during the entire bankruptcy case unless it is lifted by order of the court.  A creditor may request that the automatic stay be lifted so that it can proceed with state remedies to collect a debt; however, a valid legal reason must exist for the court to grant such a request. The automatic stay is designed to protect the debtor and his assets from his creditors.

While most creditors understand the provisions of the automatic stay, some will continue to contact the debtor to obtain payment of a debt. Creditors or parties that violate the provisions of the automatic stay are subject to penalties and sanctions by the bankruptcy court.  If a debtor feels that he is being harassed by a creditor in violation of the automatic stay, he should notify his bankruptcy attorney immediately.  In most cases, a letter from the bankruptcy attorney will stop the creditor from taking further action; however, in cases where the creditor refuses to stop collections, the attorney may file a motion with the bankruptcy court to resolve the matter.

How do I stop collections once and for all?

You contact an experienced bankruptcy attorney for a free consultation to explore the remedies available under the bankruptcy code. There are several chapters of bankruptcy available to debtors.  The attorney will discuss your income, expenses, assets and debts before advising which chapter of bankruptcy is best for your unique financial situation.  Once you make the decision to file a bankruptcy, your bankruptcy attorney will guide you through the process, explaining each step and answering your questions to make sure that you understand and feel comfortable with your decision. Having an experienced bankruptcy attorney on your side will reduce the level of stress and anxiety that you have been feeling while dealing with debt collectors.

The Law Office of Gene F. Turnwald has been helping clients in Michigan find relief from debt collectors for over 21 years.  When you want a compassionate attorney who understands what consumers are facing when they are dealing with financial problems, you need Attorney Turnwald on your side.  Contact our office today to schedule your free bankruptcy consultation to discover how bankruptcy stops collections and gives debtors the fresh start they need to relieve the stress caused by debt problems.