Will Filing for Bankruptcy Stop Collection Calls, Wage Garnishment, and Foreclosure in California?
Bankruptcy is often seen as a death knell for your finances. It’s the last resort, and one from which your finances may never recover. In actual fact, bankruptcy could be your saving grace. Rather than a finality, it should be seen as a fresh start, and it all begins when you first file and are granted an automatic stay.
So, what does that mean for your current debt and your creditors, and where do things go from there?
Understanding the Stress of Debt Collection in California
There are close to 600 debt collectors in California, and fewer than 2% of these manage close to 60% of the state’s debt collection lawsuits. The Rosenthal Fair Debt Collection Practices Act provides some protections against aggressive and deceptive tactics, and prohibits collectors from misrepresenting debts and calling late at night, but they can still chase debtors, and this creates immense stress.
Collectors can also seek judgments for wage garnishments and property liens, tightening the noose on debtors who are already struggling to manage their finances.
A bankruptcy filing can alleviate some of that stress by initiating an automatic stay under Bankruptcy Code § 362. It immediately halts creditor action, prevents enforcement, and protects the debtor’s estate. Just as importantly, it grants them some breathing room and means they can manage the filing without the threat of legal action hanging over them.
What Happens When You File for Bankruptcy?
An automatic stay is granted as soon as you file for either Chapter 7 or Chapter 13 bankruptcy in California. A court-appointed trustee will then be assigned to your case, and they can assess your financial situation and determine which of your assets are exempt.
Unsecured debts are then discharged for Chapter 7 bankruptcies, while repayment plans are structured for Chapter 13.
There are many nuances to this process, including variations in exemptions and exemption allowances across different counties. A bankruptcy attorney can help you with this process and ensure you keep all of your exempt assets and take the best option for your situation.
Does Bankruptcy Stop Collection Calls and Harassment?
Yes. The automatic stay prevents all credit correspondence and harassment, and creditors will be sanctioned if they break these rules. Certain government actions can proceed, and bankruptcy does not halt criminal proceedings, nor does it stop alimony and child support collections.
Can Bankruptcy Stop Wage Garnishment?
Yes, it stops collection actions and may eventually discharge or restructure debts related to the garnishment. However, the long-term outlook will depend on the type of bankruptcy being filed.
Will Bankruptcy Stop Foreclosure or Eviction?
Both Chapter 7 and Chapter 13 filings will stop foreclosure action. However, this is only temporary with Chapter 7, and it doesn’t clear mortgage debt. The lender can request that the foreclosure continue, and unlike Chapter 13, it doesn’t structure a repayment plan for missed mortgage payments.
If your landlord has initiated the eviction process, the automatic stay may delay it, but either way, you’ll still owe rent, and the process may continue later.
What Bankruptcy Does Not Stop
An automatic stay won’t stop everything, and the following processes may continue as before:
- Criminal cases
- Some tax proceedings
- Eviction proceedings
- Child support
- Alimony proceedings
How Long Does the Automatic Stay Last?
An automatic stay will typically last until the bankruptcy case is dismissed, closed, or discharged. However, a creditor may apply for a motion for relief, and if granted, they can proceed with collection activities even while the bankruptcy is ongoing.
How Quickly Can You Get Relief After Filing?
Although it may take a few months for your debts to be discharged, the automatic stay will take effect as soon as you file. So, within 24 hours of filing, creditors must stop harassing you, and collection activities will cease.
From there, the next steps will depend on the type of bankruptcy that you file:
Timeline for Chapter 7 Bankruptcy in California
- Within 180 days before filing: Complete a mandatory pre-bankruptcy credit counseling course.
- Day 1: File for Chapter 7 bankruptcy and initiate an automatic stay.
- Before day 14: File additional documents not submitted previously.
- Before day 30: File a Statement of Intention, outlining your plans for secured debts such as home and car loans.
- Before day 50: Attend a Meeting of Creditors and answer questions about your assets and finances.
- Before day 60: Complete a Debtor Education course to gain money management skills.
Timeline for Chapter 13 Bankruptcy in California
- Within 180 days before filing: Complete a credit counseling course.
- Day 1: File for Chapter 7 bankruptcy and initiate an automatic stay.
- Up to day 30: Begin making planned payments to the trustee.
- Up to day 50: Attend the Meeting of Creditors.
- Day 50 to 75: The court will approve or deny the repayment plan.
- Year 3 to 5: Make payments on time.
Next Steps: Getting Immediate Help With Debt Relief
An automatic stay is a massive relief for anyone dealing with the daily stress of corresponding with creditors. A bankruptcy filing can immediately stop those calls and emails, with the trustee then working toward a solution that clears your debts and gives you a fresh slate.
To simplify this process and ensure the best outcome, work with a trusted bankruptcy attorney like County Law Center. We offer a free initial consultation to discuss your case, and can take things from there. Contact us today to schedule your consultation.