How the Automatic Stay Stops Creditor Inquiries

How the Automatic Stay Stops Creditor Inquiries

September 25, 2019

When you file for bankruptcy, you become the immediate beneficiary of an automatic stay in Montgomery County, TX. This is a legal document sent to your creditors notifying them that you have filed for bankruptcy. When the automatic stay is in effect, it prohibits your creditors from taking actions such as:

  • Continuing or commencing any form of legal proceeding against you
  • Recovering any claim against you
  • Enforcing any judgments handed down before the bankruptcy
  • Collecting, recovering or assessing a claim against you
  • Continuing or commencing any proceeding with regard to tax liability
  • Obtaining possession of any property that is a part of your estate, or creating/enforcing a tax lien against your property
  • Garnishing wages, seizing bank accounts or taking any foreclosure actions against a property

When you consider these benefits, it quickly becomes clear that the automatic stay is perhaps the most beneficial aspect of a bankruptcy proceeding. It forces creditors to immediately stop their collection actions, and even prevents them from contacting you at all. The relief you get from harassment can provide you with some much-needed peace of mind and allow you to focus on your financial recovery.

What happens if a creditor violates the automatic stay?

Of course, just because an automatic stay is in effect doesn’t mean all of your creditors will honor it, even though federal laws require them to do so. The good news is you have some legal tools at your disposal if a creditor does violate the automatic stay, especially if you’re working with a bankruptcy attorney.

If the creditor does or says anything in violation of the automatic stay, then it can be held in contempt of court and be subject to sanctions from the federal bankruptcy court. These sanctions generally include large fines.

Creditors are allowed in some circumstances to file motions to modify the automatic stay. This often happens in Chapter 13 bankruptcy cases if the debtor is not properly paying back his or her debts. However, if the creditor does not file such a motion or the motion fails, the creditor cannot continue harassing you for payments or taking any collection actions against you.

Considering all of this, it is crucial that you work with an experienced bankruptcy attorney so you can protect and enforce your rights throughout the bankruptcy process. It is not unusual for creditors to look for loopholes or to continue harassing their debtors even after the automatic stay goes into effect, and if you don’t have skilled representation, you could put yourself into a situation where you accidentally forfeit some of your rights.

While it can be a difficult decision to file for bankruptcy, there are some circumstances in which it is the clear best path forward for you financially. Rejuvenating your financial situation and your credit score can take some time, but it will give you a clean financial slate and get creditors off your back.

For more information about the automatic stay in Montgomery County, TX, contact an experienced bankruptcy lawyer at the office of James R. Jones, Attorney at Law.

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