If collectors are hounding you and you will be declaring bankruptcy, the automatic stay will stop the harassment.
Those facing bankruptcy have many concerns about the recent changes to the U.S. bankruptcy laws. They feel they are way too friendly for creditors, leaving debtors facing a struggle to handle their unmanageable debts. However, there are provisions to protect debtors and one of those is the automatic stay, found in section 362(a) of the Bankruptcy Code (Code).
This particular section, paraphrased, says that if you file for bankruptcy, the petition automatically halts any collection action by creditors. In laymen’s terms, the stay or stop is similar to an automatic court order that instructs the debt collector to halt all collection activities against the petitioner. As a further point of interest, the auto stay also halts many civil lawsuits against the filer.
The code includes an automatic halt of any collection proceedings, simply because it is assumed that once the petition is filed, the debtor is immediately entitled to Code protections. If you have filed a Chapter 7 bankruptcy, the stay also keeps as much property as possible within the estate to be disposed of later to pay creditors.
If collections agents are still contacting you after you have filed your bankruptcy petition, they may be found to be in contempt of court. The courts will not hesitate to halt any collection efforts and impose penalties and fines. A collector who continues to chase a debtor after a petition is filed may also be ordered by the courts to pay the debtor’s lawyer’s fees relating to collections attempts.
There are also provisions under the newer code to level punitive damages against a collection agent that acts in contravention of a stay. Of course, there are exceptions to this rule of thumb and to find out what those are you would need to speak to a knowledgeable Iowa bankruptcy lawyer.
What does the auto stay do for a bankruptcy petitioner? Among other things, it means the collector must stop any informal collections attempts. They must also cease with any pending lawsuits, stop any efforts to collect on final judgments against a debtor and cease attempts to get a secured interest in a debtor’s property.
You may also be interested to know that once you file for bankruptcy, the code halts any and all attempts to repossess or foreclose on your house. This is applicable whether or not you choose to file a Chapter 13, Chapter 7 bankruptcy or indeed, any other chapter you choose to file bankruptcy under. This is something you should talk to your Iowa bankruptcy lawyer about.