Counting The Ways Bankruptcy Gives You A Fresh Start: Bankruptcy Stops Collection Efforts

Counting The Ways Bankruptcy Gives You A Fresh Start: Bankruptcy Stops Collection Efforts

Bankruptcy gives honest debtors struck with misfortune a new opportunity in life and a clear field to succeed in the future, without the pressure and disillusionment caused by preexisting, burdensome debt. When you receive your bankruptcy discharge, you should have little or no unsecured debt while retaining a reasonable amount of property. You will have gained a fresh start in your financial life. One significant way that bankruptcy provides a fresh start is that it frees you from the collection efforts of all your (now past) creditors.

While a fresh start offers many benefits, including stopping all contact by any of your former debt collectors, it does not erase or eliminate a debt entirely. A bankruptcy discharge is technically an injunction that makes a debt uncollectible by stopping (or enjoining) collection efforts. The debt remains and may appear on a credit report, but all activity related to collecting the debt must cease from the day the bankruptcy was filed. However, a former creditor may still attempt to collect the debt from a source other than you, such as executing on property subject to a lien or demanding payment from a co-debtor who has not filed bankruptcy.

One of the fundamental features of federal bankruptcy law is the mechanism known as the automatic stay. This is an automatic injunction that stops collection action by creditors, with certain exceptions, when a debtor filed a bankruptcy case. Under § 362 of the United States Bankruptcy Code, the automatic stay begins at the moment that the bankruptcy petition is filed.

The only way for a creditor to avoid the automatic stay and avoiding breaking federal law is to move or request the bankruptcy court to remove or “lift” the stay, which is a motion asking for permission to continue with the collection of the debt in question. Motions to lift the automatic stay typically involve a foreclosure action, a landlord/tenant dispute, or a lawsuit in another court.

Bankruptcy will prevent utility disconnections for a limited time. It will stop foreclosure proceedings. It will temporarily prevent an eviction. Bankruptcy will stop wage or bank account garnishment and stop a repossession allowing you to have your car returned. If you’ve received an overpayment of benefits, it will stop any collection action for this overpayment.

Bankruptcy provides a fresh start by liberating you from the collection efforts of creditors, who may often engage in harassment and other unscrupulous conduct. It is important to consult with an experienced Utah bankruptcy attorney, such as one of the many qualified attorneys at the Morrison Law Group who can explain the process and timeline of both Chapter 7 and Chapter 13 bankruptcy cases. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.

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Theron Morrison

Utah’s top bankruptcy and consumer protection attorney.