Are you being hounded by creditors? Are they threatening to take further legal action, such as foreclosure? If so, you need the protection of bankruptcy as soon as possible. But what does bankruptcy filing do to protect you from creditors? And what can they still do even after you file? Here's a short guide to what your creditors can and cannot do.
1. Creditors Can Attend the 341 Meeting
The 341, or creditors meeting, is the main opportunity to verify your bankruptcy facts under oath and answer any questions regarding them. Most creditors will not attend, but they are permitted to do so. They may also ask additional relevant questions to protect their interests, such as the location of secured assets or an inquiry about a large purchase on credit.
2. Creditors Can't Pursue Collections
Bankruptcy filings come with an underappreciated benefit known as the automatic stay. This stay prevents creditors from pursuing any form of further collection — including notices, phone calls, texts, emails, personal visits, harassment, foreclosure, repossession, garnishments, and judgments. This stay extends until your case is completed, although individual exceptions may be granted by the court.
3. Creditors Can Object to the Case
Because the bankruptcy trustee has a responsibility to look out for creditors' interests, the creditors may object to elements of the case. They may argue, for instance, that their particular debt is not eligible for discharge according to the rules of the court. Or a creditor may object to your Chapter 13 repayment plan if they won't receive as much repayment as they would under Chapter 7.
4. Creditors Can't Receive Undue Payments
Don't try to pay off any single creditor preferentially. Preferential payments — in which a creditor receives money that all creditors have a shared right to — are not allowed. Every creditor must be treated equally under bankruptcy. This means your loan from a beloved uncle must be treated the same as your credit card balances. Failure to do so could be bankruptcy fraud.
5. Creditors Can Go After Others
Finally, do you share any debts with another person or entity? If so, the creditors may have a right to pursue your co-borrower (or co-signer) for the full amount. Remember that a discharge of your own debt doesn't mean a discharge of the other borrower's responsibility to pay. In some cases, co-borrowers should consider their own bankruptcy.
Where to Learn More
Want to know more about what your creditors can and cannot do before, during, and after bankruptcy? Start by meeting with a bankruptcy lawyer in your state today.
Share16 August 2022
