The Fair Debt Collection Practices Act is federal law, and all states must abide by it. In that Act, there is a provision called an “automatic stay”. Basically, it means that once a debtor (individual or joint) files either Chapter 7 or Chapter 13 bankruptcy, creditors must cease all collection activities for 30 days. This stay applies to phone calls, letters, wage garnishment, and civil law suits, or any other action taken on non-exempt debts.
Exempt Debts Still Collectible
Exempt debts – those that may be collected regardless of bankruptcy – are such things as spousal support, back taxes, legal fines or restitution, defaulted student loans, etc. In most cases, these debts are non-dischargeable through bankruptcy, so a debtor doesn’t have the same protection as with credit cards, personal loans and other consumer debts.
In order to qualify for the automatic stay, a debtor must actually file bankruptcy, not just intend to. They must furnish the creditor with the name, phone number and mailing address of their bankruptcy attorney, and their case number. If the debtor fails to do so, the creditor is not required to stop collection activity.
Filing Bankruptcy Pro Se
For debtors filing bankruptcy pro se (acting as their own attorney) the stay is still in effect, but the phone calls and letters may not stop. They should just change in nature. Since the debtor has provided the case number to his creditors, the actual collection activity stops. The creditor still needs communication with the "attorney” regarding some details of the case such as hearing dates, etc, but since the debtor now fills that position, he becomes the contact person.
The case should be resolved (“discharged” or put into a payment plan) within those 30 days. If not, the collection activity may resume. Debtors in this position should speak to their attorneys (or legal services offices) about extending that stay to allow for the courts’ scheduling.
Automatic Stay May be Lifted
The stay may be lifted and collection activity resumed prior to the end of the 30 day period for specific reasons, such as the filing was dismissed or deemed to have been filed “not in good faith.”
For those filing pro se, informing creditors about a pending bankruptcy, even before it is actually filed, can greatly reduce the amount of phone calls received. Creditors will often not waste their time chasing after dead ends. This is not the case with all of them, but it may provide some relief as the debtor gathers necessary documents and goes through the steps a little more slowly than a professional attorney.
While this article has been thoroughly researched via trusted legal resources, it is intended purely for informational purposes and not to be construed as legal advice. Persons considering or needing counsel about bankruptcy should contact a bankruptcy attorney or their state legal services office.
Works Cited:
Fair Debt Collection Practices Act. 1966 (2006).Web
U. S. Code Title 11 – Bankruptcy. 1978. Web.
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