What is the Immediate Impact of My Chapter 7 Filing
Despite what you may have heard, a bankruptcy filing remains the most powerful technique to stop adverse creditor action. The minute you file Chapter 7, all creditor action must stop. The very limited exceptions to this rule include criminal prosections and actions arising in a divorce or domestic relations case. There are also some limitations to the reach of the automatic stay for debtors who have filed one or more bankruptcy cases within the past year.
The vast majority of creditor action against you must stop because of something called the "automatic stay" of bankruptcy. Examples of actions that are subject to the automatic stay include:
efforts by a motor vehicle repossession agent to grab your car or truck
foreclosure proceedings by a mortgage company
garnishment of your wages
the continuation of a lawsuit against you in state court
telephone collection calls
the filing of a lawsuit against you
The Bankruptcy Code provides that the automatic stay goes into force the minute you file your Chapter 7 case. Obviously, most of your creditors will not know about your filing, but they are still subject to the automatic stay.
If a creditor takes an action against you, you can and should advise the creditor that you have filed Chapter 7 and provided the case number.
What happens if my car finance company reposseses my car after I file? Answer: the repo agent must return the car to you. Note, however, that you may have to show proof of insurance to get the vehicle back.
What happens if my mortgage lender sells my house at foreclosure? Answer: the foreclosure sale will be deemed invalid. You will remain title owner of your home?
If a creditor acts willfully - that is, a collection agent, repo man or even a collection lawyer takes action to collect a debt despite having actual knowledge of the Chapter 7 filing, that creditor can be held liable for damages and attorney's fees. If you think that one of your creditors has not honored the automatic stay, make sure to tell us immediately.
As you might imagine, the automatic stay may turn out to be only temporary relief. Creditors can ask your Bankruptcy Judge for "relief from the stay" if the law permits. For example, if you have missed four car payments and you file Chapter 7, the vehicle finance company (also called the secured creditor) can argue to the Bankruptcy Judge that it is entitled to relief from the stay because your bankruptcy case does not adequately protect the lender's interests.
If you have any questions about whether a particular creditor action is permitted, please call our office at 404-522-2222.