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Can creditors try to collect money after you file bankruptcy?

One of the primary reasons why people file for bankruptcy is that they are tired of collection attempts by creditors. They want to be able to check the mail without seeing a pile of demand letters and to answer the phone without having to fret about who is hounding them for money.

Some people who are considering bankruptcy as a way to regain control of their finances don't realize that they will likely have a chance to rest easy without worrying about collection attempts once the bankruptcy is filed. This is because of the automatic stay, which goes into effect upon the filing of the case.

What is an automatic stay?

An automatic stay stops creditors named in the bankruptcy case from being able to contact you. There are some other creditors who will have to stop trying to collect from you. These include your mortgage company, utility companies, some government agencies and landlords.

For example, there will be a moratorium on your landlord being able to evict you once you file for bankruptcy. The exception to this is if the landlord already has the wrongful possession order from the court. If he or she has this, the eviction can continue on despite your filing for bankruptcy.

How long does it last?

The automatic stay lasts the duration of the case, in most instances. If the debt was included in the case, the collection attempts won't be able to recommence once the case is dismissed as long as the debt was discharged as part of the bankruptcy. Some classifications of collections do have specific limits.

For example, a bankruptcy can prevent the disconnection of utilities for at least 20 days. It can only stop evictions for a short period — sometimes as little as a few days or weeks. Government agencies will typically stop collection of overpayments until the automatic stay gets lifted.

Are there any exceptions to this?

There are some collections that won't stop even if you file for bankruptcy. The collection of fines and restitution, some tax collections, child support payments and loan repayments from a pension aren't included in the automatic stay. Even though this is the case, you might find that not having to try to scrape up money for those bills that are included leaves you room to better afford these collection attempts.

Because the bankruptcy laws are so complex, it is best to learn how the automatic stay will impact your case. Certain variables can change what happens, so learn all that you can about what an automatic stay can do for you.

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