Threatening letters can become part of a debtor’s life if he is facing bankruptcy. But when you file, an automatic stay goes into effect, and the demands for cash stop. Bankruptcy attorney Benjamin Ginter, who runs the Law Offices of Benjamin J. Ginter in Cranford, New Jersey, explains how it all works.
When someone files for bankruptcy, an automatic stay goes into effect. What that means is that any creditor that is calling the debtor, sending letters to the debtor asking for debt repayment, trying to foreclose on a property, suing the debtor, garnishing the debtor’s wages, or levying the debtor’s bank accounts, has to stop immediately. All collection proceedings have to stop as well. If a creditor does not abide by this, he can be sued.
Once the case moves forward, more often than not, the debts that the creditor was trying to collect are wiped out. Lawsuits that are filed are usually terminated and levies are released if you have a successful bankruptcy. Foreclosures are stopped and threatening letters cease.
Caveat on Secured Debt
However, the caveat with some of this is that often if you have a secured debt, let’s say a mortgage, or you are financing a car, you file for bankruptcy and the automatic stay goes into effect. These secured creditors are not allowed to collect the debt from you while you are in bankruptcy.
However if the debtor wants to retain the property, if the debtor wants to keep the car or keep the home, then he has to make provisions to continue paying for these secured debts, such as car or mortgage payments.
If the debtor does not do this, then the secured creditor more often than not will file a motion to lift the automatic stay and ask the court for permission to continue with the collection proceedings. The secured creditor could then repossess the car and foreclose on the house if the debtor continues not to pay the debts.
