People who file for bankruptcy might be tired of having debt collectors constantly contacting them. Often, phone calls and mailed demands are used to try to get people to pay. This can make answering the phone or checking the mail a stressful experience.
When you file for bankruptcy, the court issues an automatic stay. This prevents debt collectors from contacting you to demand payment on the account. While some might think that this only benefits the person filing for bankruptcy relief, that’s not its primary purpose.
The main reason for an automatic stay
The primary reason for the automatic stay isn’t to stop the communication with the filer, but that’s a welcome byproduct. Instead, the automatic stay is issued so that each creditor doesn’t have an unfair advantage during the bankruptcy process. Preventing debt collectors from contacting the filers means that they can’t circumvent the bankruptcy court to get a payment.
When a person files for bankruptcy, there’s a good chance that the creditors aren’t going to get the full balance due. All debts are assigned a priority level according to bankruptcy laws. Creditors receive payment from the bankruptcy trustee based on the priority level. Any balance that’s remaining once the bankruptcy is finalized must be discharged.
Anyone who’s afraid to answer the phone or check the mail because of persistent debt collectors may explore bankruptcy. Filing could provide you with the financial relief you need so that you can enjoy a fresh start. Consider how filing might impact you now and into the future so that you can make the decision that’s right for you.