The minute you file bankruptcy, the Bankruptcy Court issues an order telling all of your creditors to leave you alone. No more phone calls. No more collection letters. No more lawsuits. No garnishments. No repossessions. No foreclosures. Nothing. No actions whatsoever against you or your assets. This order has a name. It is called the “Automatic Stay,” and it is issued pursuant to Title 11 of the United States Code, Section 362.
The Automatic Stay prohibits your creditors from taking any action that could be considered an attempt to collect a debt form you or your assets. Once you file bankruptcy, the creditor is not even allowed to call you or send you letters. In addition, the creditor must stop any collection attempts already started. The Automatic Stay is very powerful, and puts the full weight of the United States Courts to work for you, to make sure your creditors leave you and your assets alone.
And if you file for Chapter 13, section 1301 of the Code also applies the automatic stay to a co-debtor on any consumer debt.
If a creditor violates the Automatic Stay, you have the right to bring the creditor before the Court for Contempt of Court, and to be compensated accordingly. This is not a hollow right. Bankruptcy Court Judges do not take kindly to creditors who ignore their Order-the Automatic Stay-and these Judges have been known to punish creditors severely.
Very simply, once you file for bankruptcy, creditors must leave you alone or suffer the consequences.
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