Debt collectors want one thing—the money people owe them. Unfortunately, debt collectors aren’t won’t consider extenuating circumstances. However, debt collectors will understand one thing—chapter 13. When chapter 13 bankruptcy cases are filed, debt collectors will have to stop trying to obtain the debt owed to them.
What Is Chapter 13?
Chapter 13 is one of two personal bankruptcy options. Under chapter 13, people are allowed to repay the debt collectors they owe. The U.S. Bankruptcy Court approves what’s known as a repayment plan which indicates the amount of monthly payments. Typically, the chapter 13 lasts three to five years.
Chapter 13 Automatically Stops Debt Collectors
Once the chapter 13 is filed people receive an automatic stay. The stay immediately stops debt collectors from initiating or continuing lawsuits, wage garnishments, foreclosures and telephone calls or sending letters demanding payment. After the petition is filed bankruptcy clerks gives notice of the bankruptcy case to all debt collectors whose names and addresses are provided by the debt, according to Michael T. Chulak & Associates. This means that people won’t have to inform debt collectors about filing bankruptcy or that they must stop any debt collection activities because the bankruptcy court will do it for them.
Co-Signers Are Protected With The Automatic Stay
For individuals who purchased property with the help of a co-signer such as a relative or friend can still file chapter 13. Under the automatic stay provision, co-signers are not required to file for chapter 13 also. However, the co-signers will have to include their expenses and income in the petitioners’ bankruptcy paperwork. According to the Money Coach, the bankruptcy trustees will have to accurately assess financial responsibility and the ability for the petitioners to repay the debt over time.
Debt Collectors Can Request The Stay Be Removed
In certain cases debt collectors may petition the Court to lift, or remove, the stay. For instance, under chapter 13 people are required to make monthly payments to the bankruptcy trustees. The trustees will then distribute the money to the creditors. Also, if people have current debts such as a mortgage they must make those payments too. If non-payment occurs in either one of the situations, debt collectors can request the stay be lifted so they can pursue or continue debt collection activities.
Seek Legal Help
Bankruptcy attorneys can help people interested in stopping debt collectors. They can explain the bankruptcy process and file paperwork. Also, they can some creditors wanting to lift stays.
