If you are struggling with overwhelming debts that you cannot pay, bankruptcy can shield you from creditors and legally restructure your personal finances. The federal law contains many consumer protections that can give you “breathing room” to account for and reorganize your financial affairs. These protections are available to a debtor before, during, and after bankruptcy.
There are several powerful consumer protections available to all consumer debtors, including:
- The Telephone Consumer Protection Act, which limits when and how a debt collection call can be placed.
- The Fair Credit Reporting Act, which regulates how consumer credit information is collected and reported.
Perhaps the most useful federal protection for a pre-bankruptcy debtor is the Fair Debt Collections Practices Act, or FDCPA. This law states that a third party debt collector (collection agency or attorney) must stop all communications with the consumer after an attorney is hired. Consequently, after hiring a bankruptcy attorney to prepare a bankruptcy case the debtor gains the added benefit of obtaining relief from collection harassment under the FDCPA.
Once the bankruptcy case is filed, the debtor receives the protection of a court injunction, commonly called the “automatic stay.” The automatic stay is a temporary injunction that prohibits all collection activity during the bankruptcy case. All telephone calls, mail harassment, lawsuits, garnishments, repossessions, and foreclosure activities must stop immediately once the bankruptcy case is filed. The automatic stay continues throughout the bankruptcy case, until either the court orders the stay lifted, the debtor receives a discharge, or the case is dismissed. Co-debtors are also protected by the automatic stay if the debtor files a Chapter 13 case, but not if the case is a Chapter 7 bankruptcy.
After the debtor receives a discharge, the automatic stay temporary injunction is replaced by a permanent injunction contained in the discharge order. A creditor or subsequent collector is forever barred from collecting on a debt that is discharged in bankruptcy. Specifically, the creditor may not contact or collect from the debtor personally. However, the creditor may have other collection rights available, including collecting from a co-debtor who did not file bankruptcy.
If you are struggling with debts you cannot afford to pay, speak with an experienced bankruptcy attorney and discuss your options. Bankruptcy is powerful and lasting relief that can permanently discharge your debts and help you start on a new and better financial path.