Debtors who have more bills than they do money each month may decide that they’re going to file for bankruptcy. This is a legal method of doing away with part or all of the debt they owe. There are different types of bankruptcies. Some require the person or business that filed to make payments to a trustee who pays creditors. Others liquidate assets and the proceeds from that are distributed to creditors.
When a bankruptcy is filed, the court issues an automatic stay. This means that creditors have to stop all collection attempts. They aren’t allowed to send written mail, text messages or emails. They can’t call the person or stop by their home in an effort to collect the debt.
Why does the court issue an automatic stay?
Creditors aren’t likely going to get the full balance due on accounts that are filed in bankruptcy. It’s unfair to other creditors if one or more of them go to the person who’s filing and collecting money outside of the court system.
In a bankruptcy, all creditors are assigned a priority level. The payments they get are according to that level. Once the bankruptcy is closed, any balance that remains due on an account that was part of the case has to be discharged. The creditor can’t go after the person to try to collect the remaining balance.
Any creditor who’s trying to collect on a debt must ensure that they’re doing things within the bounds of the law. Breaking the law means that you could be subjected to legal actions and fines. Learning about the ever-changing laws and regulations can help you to keep your debt collection company out of trouble. Debtors may sometimes bring complaints against your company, so you should have someone who can handle those.