In the period leading up to your bankruptcy filing, you may be subject to increasing creditor contact. Creditors trying to recoup a debt are often relentless in their pursuits, which causes the debtor a great deal of stress. As an important part of the bankruptcy code, an automatic stay is designed to provide debtors an opportunity to negotiate repayment without constant creditor contact.
What is an automatic stay?
All chapters of bankruptcy have an automatic stay period. After filing your bankruptcy petition, creditor actions against you must cease until the case is completed. Creditor actions include threats of foreclosure and repossession of property, as well as collection attempts. Creditors are not permitted to call, send correspondence through the mail, email, or otherwise make attempts to reach you regarding debt repayment during the automatic stay period.
Are there exceptions for certain creditors?
The automatic stay does not offer protection in all situations, however. Creditors can request a court order which would relieve them of the duty to refrain from contact. Certain types of property may not be considered necessary, meaning debt associated with them is not included in the reorganization plan. If the debtor has no equity in the property, the creditor might be granted a court order. This would allow the creditor to continue contact in pursuit of repayment without fear of legal reprisal.
What is an avoidable transfer?
When money is paid to a creditor immediately before the bankruptcy petition was filed, the debtor may be able to undo the transaction. An avoidable transfer returns the money paid by the debtor to a creditor, who can then include it in the bankruptcy reorganization payment. Payments made during the 90 days prior to the bankruptcy filing may be eligible for avoidance, but some transactions are considered eligible going back one year before a filing.