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Would bankruptcy stop collection actions?

On Behalf of | Jun 10, 2021 | Uncategorized

Filing for bankruptcy might be the right choice for a Michigan resident suffering from heavy debt. When debt becomes crushing, the problems could ripple into other areas of life. Creditor harassment might make things even worse if creditors ignore rules about collection calls and bother or even threaten people who owe money. The bankruptcy court could put a stop to such behavior, making life potentially less stressful for a debtor.

Bankruptcy and collection practices

Personal bankruptcy allows someone whose debts exceed assets to explore payment or liquidation options. Regardless of what type of bankruptcy the person files, the court will stop collection actions. Under the law, once a person enters into bankruptcy proceedings, collection actions against the person must cease. Of course, the creditors must become informed of the bankruptcy filing. Hopefully, the court will act without delay and send the necessary notices to collectors.

The debtor should provide the court with a complete list of creditors. Any omissions may cause some issues with the proceedings.

Ignoring the bankruptcy court

Creditors could make a significant mistake if they ignore orders to cease collection actions. Bankruptcy is not an informal process. It is a legally binding proceeding that takes place in federal court. A creditor runs the risk of being in contempt of court when ignoring the judge.

The debtor could explore options to sue a creditor for harassment. Laws exist to protect debtors from a creditor’s malicious actions. However, a creditor might file a motion to lift the stay on the collection action. That may happen when a creditor intends to foreclose on a property with no equity.

Anyone with questions about how to stop collection actions could speak to an attorney. The attorney may also provide counsel regarding bankruptcy filings.