When you file for Chapter 13 bankruptcy, your creditors have to stop calling you, emailing you, and sending you notices that you owe money by mail. They’re no longer allowed to attempt to collect debts because the court issues what’s called an automatic stay.
What is an Automatic Stay?
An automatic stay is an order the U.S. Bankruptcy Court issues when a person files for bankruptcy. It notifies creditors that you’ve begun the bankruptcy process so that moving forward, they’ll deal with the trustee in your case rather than you, personally.
When you and your Maryland bankruptcy attorney begin the Chapter 13 process, you’ll name your creditors and list the debts you owe.
Creditors named in the automatic stay cannot attempt to collect those debts except through the court system. Your creditors must also stop all other actions, such as court proceedings and administrative actions, against you once the court notifies them that you’re filing bankruptcy. There are a few exceptions, which you and your bankruptcy lawyer can discuss if they apply in your case.
Exceptions to the Automatic Stay
There are two exceptions to the automatic stay. If you filed for bankruptcy and the court dismissed your case within the past year, the automatic stay only goes into effect for 30 days after you file.
If you filed bankruptcy and had two (or more) cases dismissed within the past year, the court will not issue an automatic stay.
Even if these exceptions apply to you, you can still ask the court to issue an automatic stay to stop foreclosure. However, your lawyer must prove to the court that you didn’t act in “bad faith” by filing multiple bankruptcy cases.
If it’s been more than a year since you filed any prior bankruptcy, these exceptions don’t apply to you. The court will issue an automatic stay on your behalf.
(For the record, an automatic stay applies to Chapter 7 bankruptcy as well.)
How to Get an Automatic Stay
Like its name implies, the stay is automatic; that means as soon as you file for bankruptcy, the court will issue an order.
What Happens After the Court Issues the Automatic Stay?
Your creditors must work through the court system to recover what you owe. You and your attorney will formulate a repayment plan that spans between 3 and 5 years, and you’ll submit that plan to the court. The trustee assigned to your case will review it, and if he or she feels that it’s fair to your creditors, the court will likely approve it.
What to Do if Creditors Call You After You File for Bankruptcy
Your attorney will explain what you need to do if your creditors call you after the court has issued the automatic stay. Typically, you simply need to tell them that you are working with an attorney on the Chapter 13 process. You’ll need to let your attorney know, too.
You’ll then begin making payments to the trustee according to your Chapter 13 repayment plan. The trustee will distribute predetermined amounts to your creditors.
Do You Need to Talk to a Lawyer About Chapter 13 Bankruptcy?
If you need immediate relief from debt collection attempts and are considering filing Chapter 13 bankruptcy, call us right away at 301-933-2595 or contact us online for a free bankruptcy case review. We’ve helped many people in Baltimore, Rockville, and other communities in the DMV—and we may be able to help you, too.