How Does Bankruptcy Affect Debt Collection?

Are you currently being contacted with frequency by debt collectors? If you are also considering the possibility of filing for bankruptcy, you may be wondering about how a bankruptcy filing will affect debt collectors’ efforts to collect on what you owe. In short, if you file for personal bankruptcy, debt collectors must stop contacting you. Once you receive a discharge and your bankruptcy case is closed, those debt collectors will be prohibited from any renewed attempts to collect from you. Our West Palm Beach bankruptcy attorneys can explain in more detail.

Bankruptcy and the Automatic Stay 

Does every bankruptcy filing stop debt collectors from contacting the debtor? In short, the answer is yes. Every type of bankruptcy under the US Bankruptcy Code comes with the automatic stay. The automatic stay is a type of injunction that stops all collection actions against the debtor. To be clear, it prevents creditors and debt collectors from continuing to take action against the debtor (including all collection actions, from phone calls and texts to lawsuits), and it also prevents new collection actions from being taken.

Accordingly, one of the first and most immediate effects of a bankruptcy filing on debt collection is the product of the automatic stay: you will no longer be contacted by debt collectors or face any action from creditors or debt collectors. The automatic stay will remain in place through your bankruptcy case.

Debt Collectors Cannot Collect on Discharged Debt

If you are filing for liquidation bankruptcy under Chapter 7, all eligible debts will be discharged at the end of your bankruptcy case. The entire process, from filing your bankruptcy petition to discharge, usually takes about four to six months. Once your debts are discharged, creditors and debt collectors cannot attempt to collect on them. You are no longer liable for them, and you will not be contacted about them. As the Consumer Financial Protection Bureau (CFPB) clarifies, you should immediately inform any debt collector who contacts you about discharged debt that the debt has been discharged, since a bankruptcy discharge “permanently bars the creditor or debt collector from collection of this debt.”

Even if you have filed for Chapter 13 bankruptcy (which will not result in a quick discharge of debts as Chapter 7 will), your repayment plan will include all of your creditors, so you will not be facing debt collection actions.

Contact a West Palm Beach Bankruptcy Lawyer for Assistance

Do you have questions or concerns about debt collection in relation to your bankruptcy filing? Whether you want to find out more about filing for bankruptcy in order to halt debt collection actions against you, or you are being contacted by creditors about discharged debt after your bankruptcy case, an attorney can help you. Do not hesitate to reach out to one of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan & Eller. We can speak with you today about the specific issues in your bankruptcy case, and we can begin working with you to plan for your bankruptcy filing. Contact us for more information.

Sources:

law.cornell.edu/uscode/text/11

consumerfinance.gov/ask-cfpb/can-a-debt-collector-try-to-collect-on-a-debt-that-was-discharged-in-bankruptcy-en-1425/