A reaffirmation is an official way to “reobligate” yourself on the loan. This involves the lender sending us a reaffirmation contract to be signed by you.
Can Judicial Proceedings to Collect Debt Be Stopped by Bankruptcy?
Bankruptcy can stop the judicial process, because bankruptcy is federal law, and federal law preempts state law. All collection lawsuits are governed by state law. So if you have a lawsuit, and it is not looking good, or you do not want to spend the time and money to defend yourself, then you can file for bankruptcy protection and it would end the lawsuit. There are a few uncommon exceptions to that. If the lawsuit involved some kind of domestic support obligation, such as child support, then it would not stay the lawsuit. But, if it is a debtor-creditor situation, where some credit card company is suing you, or you are running a business, and somebody claims that you owe them money, those kinds of quintessential lawsuits are something definitely that are stayed by the bankruptcy filing.
That is a huge benefit for a lot of people. They get into a situation where they are looking at many legal fees for civil litigation, and they are looking at a chance after they spend all that money to still lose the suit and have a big judgment against them. Bankruptcy is definitely something they might want to consider, to weigh their options. They need to see what is going to be the most cost-effective way to resolve this situation. Oftentimes, a chapter 7, or 13 bankruptcies are a much more cost-effective way to resolve the situation than having your day in court, and spending perhaps tens of thousands of dollars on legal fees.
How Long After Filing Bankruptcy Will Collection Calls Stop?
They should stop immediately after you file for bankruptcy, and that is permanent. There is a distinction between unsecured and secured debt. Unsecured debt is your typical credit card debt, lines of credit, personal loans, and medical bills. Secured debt is debt in which the creditor also has a lien in some kind of collateral such as a mortgage, a car loan, a motorcycle loan, or something like that. For unsecured debt, on the date the notices go out, the creditors are stayed from any kind of collection activity whatsoever. Any calls, letters, communications, lawsuits, levies, garnishments, all of that stops. And they are not to contact you again. By the end of your suit, that debt is discharged.
Therefore, the protections are immediate in bankruptcy, the automatic stay goes into effect on day one, and that stay continues throughout the pendency of your case. Then essentially morphs into the permanent discharge where the creditors can no longer contact you. They cannot give negative reports on your credit anymore. That is a very powerful tool. If it is a secured debt and something you wish to keep, for example, your mortgage. You can say, “Hey, I like my house I want to keep my mortgage,” the lenders will stop contacting you on the date of filing just out of caution of your automatic stay rights, but then if you want to keep the house, you have to continue paying off the lien in order to keep the house.
All of that can be submitted, and make sure that goes through. In those situations, the mortgage lenders, the car lenders, if you want them, they can continue to reach out to you after that point.
Can A Bankruptcy Impact A Divorce Or Other Legal Proceedings?
Typically, no a bankruptcy cannot affect a divorce. The part of the bankruptcy code that governs the automatic stay, which is Section 362, carves out an exception for marriage dissolution proceedings, or domestic support proceedings. Those kinds of things are not stayed. I suppose it might still make sense depending upon the nature of the proceedings, whether a bankruptcy is still in your best interest, but being able to stop the divorce from going through, or stop a particular motion hearing from happening in a divorce case by filing a bankruptcy, is not going to be an effective way of doing that.
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Chapter 13 is essentially a payment plan that you organize through the court system. Think of it as a consolidation loan with teeth.
There are 2 things you must do after your case is filed: (1) attend the meeting of creditors (aka the 341 hearing); and (2) complete a debtor’s education course via phone within 75 days from the date your case was filed. The 341 hearing is sometimes referred to as the meeting of creditors because your creditors can attend the meeting and ask you questions about the information contained in your petition.