The Automatic Stay

Does the filing of bankruptcy stop the bill collectors from calling or contacting me?

Yes. One of the major benefits of filing for protection under Chapters 7 and 13 is that many creditors' actions are stayed. This means that debt collection efforts and foreclosure must be halted until further order of the bankruptcy court.

How long after the bankruptcy is filed will the creditors stop calling?

Once a creditor or bill collector becomes aware that the debtor has filed for bankruptcy protection, he/she must stop all efforts to collect the debt. If a creditor continues to use collection tactics after notification of the bankruptcy proceeding, he/she may be liable for court sanctions and attorneys' fees.

Will bankruptcy stop a wage garnishment?

Yes. However, the debtor cannot recover that amount already garnished by the creditor before the debtor filed for bankruptcy.

Will bankruptcy stop a foreclosure?

Generally, yes. However, in a Chapter 7, since a home is an asset usually secured by a deed of trust, the lender will be entitled to apply to the court for relief from the automatic stay (the order preventing creditor action by virtue of the bankruptcy). Depending upon several factors, you may be able to prolong a foreclosure until you have received your discharge from bankruptcy. A Chapter 13 is usually a better choice if you are in a foreclosure situation. In a Chapter 13, your attorney will create a plan to repay the mortgage arrears over a period of time so that you may become current on the mortgage.

Will bankruptcy stop an eviction?

Perhaps. If you file bankruptcy prior to a judgment for possession being obtained by the landlord, the eviction action is stayed. This may allow you enough time to pay the rental arrears, or under a Chapter 13 you may create a plan to repay these arrears over a period of time. You will also be required to post monthly escrow payments to the bankruptcy court. If the landlord is not willing to wait for repayment, he will most likely be able to get relief from the stay to proceed with eviction. The landlord is entitled to possession of his property and at best you will be able to remain in the property until you have received your discharge from bankruptcy or the landlord obtains an order from the bankruptcy court to go forward with the eviction.

If you file bankruptcy after a judgment for possession has been obtained by the landlord, there is no automatic stay and the landlord can proceed with eviction.

Will bankruptcy stop a judgment?

Yes. Most civil judgments are stopped by bankruptcy.

Will bankruptcy remove a lien?

Under some circumstances once the bankruptcy proceedings have started, a special motion can be filed to remove certain liens. It will take a bankruptcy court order to remove them. This is a complicated area of the bankruptcy law and an attorney should be consulted. However, generally, you may not remove an already existing tax lien.