Upon filing bankruptcy, whether Chapter 7, Chapter 11, Chapter 13, an automatic stay is imposed preventing creditors from taking ANY collection action against you: telephone calls, letters, lawsuits, garnishments, repossessions, foreclosures, all stopped.
No judge even looks at the paperwork. Although there is no paper anymore, all bankruptcy courts now use electronic filing, so everything is filed online.
Of course, the bankruptcy case has to be filed BEFORE the action you want to stop, or stay.
Other courts can issue a stay order, but there has to be a pending lawsuit, and a motion, and notice to the other side, and, then you have to win the motion.
In bankruptcy court, just file the case. A case number is assigned, which you (I do this for my client) immediately get to the offending creditor, so that they know a bankruptcy was filed, and they can cancel the foreclosure, stop the lawsuit, whatever.
What if they don’t honor the, and just keep chasing you?
That would be where the fun begins. Well, for me, the attorney. The stay is a court order, and ignoring it is, contempt of court.
The bankruptcy judge can award actual damages, including attorney fees, to you if a creditor willfully violates the stay.
Now, you do not want your car wrongfully repossessed, or, to be harassed by phone calls even after you file bankruptcy, but, getting some money does take the sting out of it.
I have recovered damages for clients from the IRS, mortgage companies, and smaller creditors who act like they are above the law.
The stay provision was a huge change enacted by the 1979 Bankruptcy Code. Previously, creditors could hound you into paying on what would otherwise be a discharged debt, and, if you paid even one penny, you legally revived the entire debt, thus negating the goal of filing bankruptcy.
Letter A image: Dreamstime