Lawsuits, Collections, Creditor Harassment

Alabama Lawsuits, Collections, and Creditor Harassment

While obtaining a “stay” or stop in collection activities should not be your sole reason for filing bankruptcy, a bankruptcy stay can be an enormous benefit to debtors plagued by threats of lawsuits and creditor harassment. The stay gives you relief from the stress of lawsuits, collections and creditor harassment, giving you the mental energy to develop a new financial plan for your life. An experienced Montgomery bankruptcy lawyer can help you evaluate your financial situation, give you long-term options about how to proceed, and navigate the bankruptcy process on your behalf.

How Does Your Bankruptcy Stay Affect Creditors?

Whether you file Chapter 7 or Chapter 13 bankruptcy, an automatic stay prohibits collectors from taking any further action to collect debts from you. After you file, the bankruptcy court will mail a notice to all the creditors you listed in your schedules. As soon as the creditor is notified of your bankruptcy, it must stop harassing you, stop its lawsuit, and stop any other collection activity. Creditors must also stop if you tell them you have filed for bankruptcy and give them your case number.

Creditors that know of a bankruptcy stay and continue to harass you or try to collect their debt can be subject to court sanctions. If a creditor still doesn't stop after being sanctioned by a bankruptcy court, you can file a lawsuit against the creditor based on violations of the Fair Credit Reporting Act as well as fair debt collection laws and unfair trade practice.

Collection Lawsuits

You should be aware that not all legal proceedings are stopped by bankruptcy. For example, criminal proceedings and divorce or child support proceedings may move forward, even when they involve back payments of alimony or child support. This is partly because alimony and child support cannot be discharged through bankruptcy. However, filing for bankruptcy can and does help to stop most collection lawsuits.

Collection lawsuits are stayed automatically once you file for Chapter 7. Assuming your Chapter 7 bankruptcy proceedings result in discharged debts, creditors whose debts were subject to the proceedings may no longer pursue collection lawsuits against you. The court will notify creditors that you are no longer required to pay them back. The court order is used to dismiss any pending collection lawsuits as well.

A Chapter 13 bankruptcy also stays a collection lawsuit. However, you may have to pay part of your unsecured debts over the course of a debt repayment plan that can last from three years to five years. This may include debts that are the subject of a collection lawsuit. After your debts are discharged, any lawsuit related to discharged debts can no longer proceed and will be dismissed. If you are not able to complete the plan, however, the automatic stay may be lifted and the lawsuit will resume.

Retaining an Alabama Bankruptcy Attorney

It can be difficult to deal with collection activities, creditor harassment or lawsuits. If the reason you are experiencing these problems is an inability to manage your finances or insufficient income, an experienced Montgomery bankruptcy attorney can help you decide if bankruptcy will make your situation better. We diligently serve clients in Montgomery, Prattville, Troy, and throughout the state of Alabama. Schedule a consultation with us by calling (334) 260-0500 or contact us online.