The motivation behind filing for bankruptcy for a lot of people is to stop the persistent phone calls and letters from creditors. Constant harassment from creditors can greatly affect a person’s life and leave them feeling overwhelmed and helpless. This disruption is especially problematic if the phone calls start happening at work, as this can jeopardize a person’s job and leave him or her in an even worse financial position. Creditors cease collection efforts after a bankruptcy petition is filed because a court order, called an automatic stay, is issued in all bankruptcy cases that put lawsuits and other legal actions against a debtor’s property on hold while the bankruptcy case is pending. This order is significant for those facing potential foreclosure or eviction. However, while the law does impose a considerable amount of regulation on creditors that favor the debtor, filers need to know about the rights creditors retain because the exercise of these rights can affect the outcome of a bankruptcy case. In fact, someone new to the Chapter 7 bankruptcy process may assume that creditors have little say in this process. In order to understand what bankruptcy can and cannot do, debtors should have some sense of the rights and obligations creditors hold. A discussion of this issue will follow below.

Automatic Stays

Automatic stays, absolutely, take away a lot of the stress bankruptcy filers have about their financial situation, and halt or delay the following types of legal procedures:

• Utility disconnection for a minimum of 20 days;
• Temporary stoppage of foreclosure proceedings;
• Evictions; and
• Wage garnishment connected with court judgments.

While this helps the debtor in the short term, the creditor still has the option to ask the bankruptcy court to lift the automatic stay so it can proceed with collection. If such a request is made, the debtor is entitled to a notice and a hearing. Typically, secured creditors, those with an interest in the debtor’s property, are most likely to ask the court to lift the stay, although this is still uncommon. The creditor has the obligation to convince the court that the request is justified, and in the case of secured property, that rationale could be the debtor is not making payments, the collateral is not sufficiently protected because there is no insurance or the likelihood the debtor will make future payments is low. This reasoning is often used by mortgage lenders when the debtor is in foreclosure because these creditors are entitled to payment or return of the property. Consequently, if the debtor will not be able to pay the mortgage regardless of the bankruptcy, there is no reason to suspend foreclosure proceedings.

Unsecured debtors also occasionally request a lift of the automatic stay, especially if the debt is excluded from discharge. Debts that fall within this category include: overdue child support, overdue alimony, and criminal restitution.

Protecting Debtor Privacy

In contrast, creditors have other requirements that exist solely to benefit the debtor. One important example of such regulation is the measures creditors must take to protect a debtor’s privacy when they file any documents with court. This protection is necessary because of the sensitive nature of the information involved in bankruptcy proceedings, and creditors are subject to significant sanctions if this provision is violated. The rule obligates creditors to remove or edit the following identifying or sensitive information:

• All but the last four digits of the creditor’s social security or tax identification numbers;
• All but the year of a debtor’s date of birth;
• The identification of minors, which is restricted to their initials; and
• All but the last four digits of a financial account number.

Check with an Indiana Bankruptcy Attorney

There are options to drowning under a mountain of debt, and a bankruptcy attorney can advise you on the measures you can take to get your financial situation under control. If you live in the Indianapolis area, attorney Christopher L. Arrington, P.C. is ready to help you solve your debt situation. Contact him for a free consultation.