When you file a bankruptcy, the filing acts to stop all collection proceedings against you while you are in bankruptcy. This is true whether you file a Chapter 7 or a Chapter 13 case.
The act that stops collection is known as an “automatic stay.”
The automatic stay prevents the following actions to collect a debt:
- Telephone calls;
- Collection letters;
- Personal visists to your home;
- Contacting friends and relatives;
Secured creditors, such as a mortgage company or an auto finance company have the right to file a motion to lift the stay in order to proceed in court to enforce the lien they have on your house or car, but until the motion is granted by the bankruptcy court they cannot go forward with legal action against you.
If a creditor continues to try to collect from you it is at risk of being sanctioned by the judge in your Chapter 7 or 13 case. A motion to enforce the stay and/or to seek sanctions from the court can be filed.
Sanctions can range from:
- An award of monetary damages to you;
- Attorney’s fees and court costs for having to enforce the stay;
by Kevin Gipson, New Orleans, Louisiana bankruptcy lawyer.