If you are in need of debt relief, someone may have told you about something called the “automatic stay” – a type of immediate relief that a bankruptcy filing can bring.
This post will describe some of the ways this relief can help protect you against debt collection efforts.
First of all, it’s worth noting that there are certain protections available under federal law, regardless of whether you have filed for bankruptcy.
The Fair Debt Collection Practices Act (FDCPA) places some limitations on how debt collection companies and attorneys are allowed to proceed in trying to collect debts.
These limitations include an end to collection phone calls if a debtor informs the collector that he or she doesn’t want to be called anymore. This applies both at home at work. Once the debtor gives this notice, collectors have to dial their attempts back – pun intended – and make their contacts in writing, not over the phone.
Texas is one of the states that have extended these protections so that they do not only apply to those trying to collect a debt for others. In Texas and several other states, the protections also apply to original creditors.
With the automatic stay from a bankruptcy filing, however, all creditors, both secured and unsecured, must stop collection activities. This includes pending lawsuits, as soon as the stay goes into effect.
The automatic stay applies to all types of bankruptcy. This means both main types of consumer bankruptcy are covered: Chapter 7 and Chapter 13. The stay also applies to business bankruptcy (Chapter 11) and other types as well.
In effect, then, a bankruptcy filing is essentially the equivalent of a temporary injunction.
Source: “Filing for bankruptcy has ‘automatic stay’ to stop bill collectors, phone calls,” Kristen MacBeth, Bankruptcy Home, 9-27-11