Understanding the Power of Filing for Bankruptcy
When you are drowning in debt, your problems can quickly compound if debt collectors and collection agencies begin to hound you for repayment. The reality is no one wants to be in debt, and if you could repay now, you would, but collectors will still seem to do everything possible to demand funds you do not have.
Many times, debt collectors will become so aggressive and relentless that their behavior begins to cross into what is defined as debt collector harassment. The Fair Debt Collection Practices Act (FDCPA), a federal law, attempts to regulate what collectors are not permitted to do. This includes using obscene or threatening language, calling repeatedly, calling at unreasonable hours, and calling you at work if you ask them to stop. Some collection agents will defy these rules, potentially forcing you to use time and resources to file complaints. Others will still work to make your life miserable just within the letter of the law.
If you are facing overwhelming debt, the last thing you need is additional headaches from hostile collectors. Even if you do manage to combat some of their worst practices, collection agents can pursue other forms of recourse should debt become sufficiently delinquent. Depending on the type of debts you owe, you could face wage garnishment, repossession, and even foreclosure.
If your debt is so great that you cannot hope to reasonably repay it, it may be time to consider filing for bankruptcy. Not only will Chapter 7 bankruptcy and Chapter 13 bankruptcy help you discharge unsecured debts, it will also allow you to stop debt collection acts in their tracks. Below, we review how bankruptcy can stop debt collector harassment and its worst consequences.
Why You Should Not Ignore Debt Collectors
When debt collectors come calling, you may be tempted to ignore them entirely, especially if they are not breaking FDCPA regulations. You can typically force collectors to stop contacting you if you ask as much in writing. You are also able to route debt inquiries to your legal representation, stopping the worst of direct harassment.
Ignoring debt collectors indefinitely, however, can have severe consequences. When a collection agent suspects they will be unable to convince you to pay the debt, they may pursue a lawsuit against you. Should the effort be successful, they can obtain a court order allowing them to garnish your wages or tax refunds as well as place levies on your bank account. This means that any income you do have coming in could be partially rerouted to creditors, leaving you less able to handle your financials.
Debt collectors will often only stop once the debt has been settled. With this factor in mind, you will need to take more decisive actions to tackle your debt.
Using Bankruptcy to Obtain an Automatic Stay
You most likely associate filing for bankruptcy with the ability to discharge certain types of debts. This is indeed an advantage of both Chapter 7 bankruptcy and Chapter 13 bankruptcy, the two filing types available for consumers. However, bankruptcy also extends other immediate benefits that can put an end to creditor harassment.
When you file for bankruptcy, the court issues an automatic stay, which halts all creditor actions taken against you. This includes any and all creditor communications, meaning debt collectors will no longer be able to call, contact, or visit you. All contact regarding any outstanding debts will have to be routed through the bankruptcy court. In other words, the bankruptcy’s automatic stay puts a swift end to creditor harassment for the duration of the filing.
Because the automatic precludes all collection actions, it also puts a stop to other techniques and procedures debt collectors use to cure debts. If collectors were successful in filing a lawsuit against you and were granted the ability to garnish your wages, all garnishment must cease for the duration of the bankruptcy. Any repossession of property cannot continue, and foreclosure efforts on your home must halt
If you are facing numerous pending or ongoing creditor actions, the automatic stay can quickly become of the most powerful benefits of filing for either Chapter 7 bankruptcy or Chapter 13 bankruptcy. Its freeze on debt collector communications and actions lasts for the entire length of your bankruptcy process, giving you the time and peace of mind to focus on reorganizing your finances.
Note that if you are already suffering from wage garnishment or any other consequence of collection actions with immediate consequences, you may need to take proactive steps to exercise your rights involving the automatic stay. The automatic stay takes effect as soon as an eligible applicant files, but the court can sometimes take several days to issue the formal order. Most collection actions can be halted ahead of the arrival of the formal automatic stay by providing information stemming from the bankruptcy. This includes the bankruptcy case number, filing location, and filing date.
How Bankruptcy Can Protect You from Creditor Harassment in the Long-Term
Because the automatic stay only lasts for the duration of your filing, you may fear that debt collectors will once again pursue you once the protective order lifts. The good news is that bankruptcy helps many filers get on top of their finances, including eliminating much of outstanding debt. Remember, collectors will only bother you if there is a debt to collect: When bankruptcy lets you discharge debts or enables you to repay others, they will have no reason to continue contacting you you.
It is important to understand how Chapter 7 bankruptcy and Chapter 13 bankruptcy differ, especially when considering the length of the automatic stay. You will generally only qualify for one or the other depending on your current level of disposable income.
Chapter 7 bankruptcy focuses on the liquidation process, which involves a filer’s nonexempt assets being placed in a trust authorized by the court. These assets will then be sold – or “liquidated” – with the proceeds used to repay outstanding debts. Once liquidation has concluded, the bankruptcy wraps up, generally permitting you to discharge unsecured debts. In many cases, a Chapter 7 bankruptcy will take 4-6 months to complete. You will be protected from debt collectors for the full length of that time.
Chapter 13 bankruptcy is more reorganizational in nature. It skips liquidation and instead combines all of your outstanding debts into a single, monthly payment approved by the court. The amount of this recurring payment is determined by your ability to pay, as determined by your disposable income, not the extent of your debt. The payment plan will last anywhere between 3 and 5 years. So long as you continue to make your monthly payment, you will thus be protected from collection actions for the entirety of the 3- to 5-year period.
Once either type of bankruptcy nears its end, the court handling your case will usually allow you to discharge unsecured debts. This can include credit card bills, medical debt, unpaid utility bills, and personal loans. If a debt has been discharged, collectors can no longer contact you about it: It is considered null and void.
If you have types of debts that cannot be typically discharged, including tax debt, student loan debt, or delinquent mortgage payments, you may be fearful that debt collectors will return. While collection agents can resume contacting you about any outstanding debts once your bankruptcy filing has formally concluded, the bankruptcy process should in theory help you overcome any remaining debts. If you are able to discharge substantial credit card debt, for example, you will likely have more financial flexibility to catch up on your mortgage. Once a debt is discharged or paid, collectors will no longer bother you.
We Can Help You Fight Creditor Harassment and Debt
Our bankruptcy attorney at Dethlefs Pykosh & Murphy is empathetic to the reality of living with overwhelming debt and consequent creditor harassment. It can be difficult to see a way out of the endless calls, letters, and threats. You do not have to face creditor harassment alone: Our team is prepared to help you navigate out of your financial situation and prevent collectors from disrupting your life. We can force all collection agents to route their communications through our office. We can also review the details of your case and determine if bankruptcy makes sense for you. If so, we can work to efficiently ensure the automatic stay protects you from further harassment and other harmful collection actions. Our lawyer will work with you throughout your case to make sure your financial future is protected.
Do not wait to get help ending creditor harassment. Call (717) 559-0271 or contact us online to learn more about how we can help.