There are federal laws in place that put restrictions on the collection activities that creditors can use against you. For example, they cannot misrepresent themselves, call at unreasonable hours of the day or night or use abusive or threatening language.
Nevertheless, even creditors who operate within these limitations can make quite a nuisance of themselves in their relentless pursuit of repayment. Fortunately, there are means of stopping creditor harassment. When you file for bankruptcy, for example, an automatic stay takes effect and temporarily stops all collection activity against you.
What is an automatic stay?
An automatic stay is a legal provision that puts a temporary halt on collection efforts against you. Your creditors must not contact you in any way. The law prohibits them from suing you, and if they have already filed a lawsuit against you, the automatic stay puts a stop to it. It essentially calls a timeout on all collection activities.
If your lenders have taken steps to foreclose on your home, repossess your car or evict you from a rented dwelling, an automatic stay can temporarily halt the process. However, once the automatic stay is no longer in effect, these activities may resume.
What happens if a creditor violates an automatic stay?
The automatic stay protects you even before your creditors receive notice of it. If a creditor attempts to take prohibited collection action against you while the automatic stay is in effect, the court can render it void.
There is one exception to this rule. A secured creditor, such as a mortgage lender, may petition the court for relief from the automatic stay. If the court approves the petition, the creditor can continue collection actions against you.
How does a creditor get relief from an automatic stay?
The creditor must demonstrate to the court that there is a good reason for seeking relief. For example, the creditor has an interest in the property and the automatic stay is necessary to protect it from mismanagement. The court makes the determination on a case-by-case basis.
