The filing of the Chapter 7 automatically issues a federal injunction which stops all collection efforts by creditors. This is called the Automatic Stay. The protections of the Automatic Stay stop creditors from taking any steps to collect a debt.
Automatic Stay: A federal injunction which stops collection efforts against you by your creditors
If you have a pending lawsuit or a garnishment, our office will alert the creditor’s attorney that you have filed bankruptcy and attempt to stop any garnishment as quickly as possible.
What if a Creditor Still Tries to Collect From Me?
If a creditor knows about your bankruptcy and still tries to collect the debt from you, they could be in violation of the Automatic Stay and could be sued for that violation. Be sure to let your attorney know if you’re still receiving collection calls or bills even after they have been advised of your Chapter 7 filing. We will take steps to stop the creditor.
3 Notable Exceptions to the Automatic Stay:
- A bank, savings and loan, credit union, or other institution in which you have a deposit is allowed to take your deposit to set off all funds which were in the account at the time you filed your bankruptcy petition against any outstanding debt that you have with them. Therefore, if you have a checking or savings account with an institution with which you also have a debt, you need to take immediate steps to remove your funds if you want to keep them! We recommend that you not make any further deposits into or write any additional checks from an account with a financial institution with which you also have a debt. Rather you should consider closing that account and open an account with another financial institution with which you do not have a debt.
- There are special rules concerning utilities, such as your electric or phone company. A utility company may not collect money that you have owed them in the past, but they can make you pay a new deposit within 20 days. Your regular monthly bill for utilities that you continue to use will still be due after you file Chapter 7. However, if you are behind on your utilities and wish to include the past due balances in your Chapter 7, you should advise us that you want the Court to set a reasonable deposit for new service within 20 days of the filing of your Chapter 7. If the utility company is trying to make you pay a very high deposit, you should advise this office immediately and we will file a motion on your behalf to request a reasonable utility deposit. You are responsible for any utility bills incurred after you file bankruptcy.
- Child support obligations remain a matter that can only be addressed in state court.