One of the most important benefits of filing for bankruptcy is that it will stop collection calls, letters, and other activities by debt collectors. This includes garnishments, lawsuits, and repossessions. When creditors or collectors do not cease collection efforts, consumers may be able to seek additional recourse in court. This article discusses some of the key protections for debtors who are being harassed over bills included in bankruptcy.

Violation of the Automatic Stay

When any person, business, or other entity files the initial petition for bankruptcy, the bankruptcy court judge enters an automatic stay. This is essentially a "safe harbor" for the debtor to catch their breath and prepare for the rest of the bankruptcy case. During the automatic stay, all collection efforts of any kind are prohibited.

The bankruptcy code provides a private cause of action for an individual injured by any willful violation of the automatic stay. The injured individual is entitled to recover "actual damages," including court costs and attorney's fees. An award of actual damages requires a showing of injury or loss stemming from acts in violation of the stay. Some examples of acts that have repeatedly supported an award for actual damages are repossession of a debtor's vehicle, locking a debtor out of a rented property, filing a lawsuit against a debtor, and continued efforts at the collection of debts owed before filing bankruptcy. Punitive damages are awarded when the creditor's collection activities are particularly egregious.

Violation of the Discharge Injunction

The final discharge order entered by the bankruptcy court judge is an injunction that releases the debtor from personal liability for specified debts. The discharge is a permanent injunction or order prohibiting the debtor's creditors from taking any form of collection action on discharged debts, including filing lawsuits, garnishing bank accounts or wages, and other collection efforts with the debtor, such as telephone calls, letters, and personal contacts.

A debtor that is harassed over discharged debts after the entry of the final discharge order can bring a contempt proceeding against the violating creditor. This is an adversary proceeding in the bankruptcy court, either brought as a motion for a contempt order, or an adversary action. The bankruptcy court judge can award an injured individual "actual damages," including court costs and attorney's fees. In appropriate cases, the creditor may be required to pay penalties or sanctions.

Fair Debt Collection Practices Act

In most courts, it is possible for a consumer to assert a Fair Debt Collection Practices Act (FDCPA) case, when a creditor attempts to collect a debt that is discharged in bankruptcy. There are many articles about the provisions of the FDCPA, but in general, that federal law prohibits certain collection practices relating to bills that the debtor does not owe. Under the FDCPA, consumers can seek compensatory damages, statutory damages, and attorney fees.

The exception to this is Walls v. Wells Fargo, a federal appellate court opinion from the Ninth Circuit Court of Appeals, which applies as binding precedent in California, Idaho, Montana, Nevada, Oregon, Washington, Alaska, Hawaii and Guam. That case held that the FDCPA was preempted by the bankruptcy code, and that debtors are limited to seeking remedies for violations of the discharge injunction, as discussed above.

By: Justin Baxter
Baxter & Baxter, LLP
Portland, Oregon
(503) 297-9031
http://www.baxterlaw.com

1. If I file for Bankruptcy I will lose all of my property.

This may be the biggest misconception surrounding filing for bankruptcy. Every person who files for bankruptcy can protect a certain amount of property while still eliminating all or a portion of their debt. Depending upon the state in which the person lives, there are state and/or federal exemption laws that permit a person to shield a certain value in property. In most Chapter 7 bankruptcy cases, people keep all of their property. They can even keep their homes and cars provided that they continue to make timely payments on those items.

2. If I file for Bankruptcy Everyone Will Know About It.

Unless you're a celebrity, the fact that you filed for bankruptcy will not become generally known. A person would have to know exactly where to look to see if your name was among the recent filings. You can even prevent your current employer from learning about your filing. An exception to that would be if bankruptcy papers needed to be sent to stop a garnishment.

3. If I file for Bankruptcy I Will Never Get Credit Again.

This is simply not true. In fact, many lenders aggressively target those that have recently filed. Although the interest rate may be higher than normal, the opportunity for credit still exists. If a person can wait two years before seeking credit after a bankruptcy, he will see an interest rate much closer to that of a non-filer. With regard to autos, it's relatively easy to obtain financing after a bankruptcy. In fact, some lenders will even provide financing before the current bankruptcy case has ended. In any case, the evidence of bankruptcy filing will be removed from a credit report after 10 years.

4. If I file for Bankruptcy All of My Debts Will Be Wiped Out.

This all depends upon the type of debt that a person has. In some cases, there are debts that are not eliminated. These may include student loans, recent taxes, child support, maintenance, parking tickets and debts incurred through fraud. Consult with an experienced bankruptcy attorney to discuss the particular debts that you have and the likelihood that they will be eliminated.

5. If I file for Bankruptcy I Can Choose Which Creditors to List.

All of your creditors must be listed on your bankruptcy petition. Although you can voluntarily pay back any creditor you desire, you cannot omit that creditor from your list of creditors. Clients often like to keep a credit card free and clear from their bankruptcy filing. They think that by not listing the particular creditor, they will be able to keep the credit card and continue to use the charging privileges. This is simply not the case. Many credit card issuers subscribe to a service that notifies them of newly filed bankruptcy cases. Don't plan on keeping a credit card after your bankruptcy filing.

By: David Siegel
David M. Siegel is the author of Chapter 7 Success: The Complete Guide to Surviving Personal Bankruptcy. He is a member of the American Bankruptcy Institute and currently practices bankruptcy law in Chicago and its surrounding suburbs. Additional information is available at http://www.bankruptcy-lawyers-chicago.com.

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When an individual or a business faces difficult financial times, it often becomes necessary to consider filing for bankruptcy protection. In order to assist in selecting the best bankruptcy option for a client, the effective advocate must be aware of and understand the advantages or disadvantages in choosing one bankruptcy selection over another. Generally speaking, bankruptcy allows people who are unable to pay all bills due to get a fresh start by jumping through various procedural obstacles. There are four kinds of bankruptcy protection provided for by statute:

Chapter 7: known as "straight" bankruptcy or “liquidation.” Chapter 7 requires that a debtor give up property which exceeds certain limits so that the property can be sold to pay creditors.
Chapter 11: known as a “reorganization.” Chapter 11 is used by businesses and some individual debtors whose debts are very large.
Chapter 12: is reserved for family farmers.
Chapter 13: known as a "wage earners plan.” Chapter 13 requires a debtor to file a plan to pay debts (or parts of debts) from current income.
Most individuals who can afford to make some payments to creditors will elect Chapter 13 bankruptcy protection. When filing for Chapter 13 bankruptcy, the individual files an interest free debt repayment plan, generally over a 3-5 year period, which consolidates (and often reduces) the debt, and must be approved by a federal bankruptcy court. While in a Chapter 13 debt repayment plan, creditors are barred from collecting, and they are required by the presiding Court order to adhere to the terms of the plan. To qualify for Chapter 13 though, the individual must be working or have a consistent source of income that will allow them monthly living expenses in addition to the required debt payments.

The repayment plan is the centerpiece of Chapter 13 bankruptcy, and is essentially an agreement between an individual and their creditors. The creditors usually agree to forgive a portion of the debts owed them in exchange for a commitment to repay the reduced debts over time. Most plans require monthly payments to the bankruptcy trustee, which is a federal official appointed by the court to oversee the case. The trustee then makes distributions to the creditors. While making payments under a repayment plan, the creditors listed in that individual’s plan cannot take any collection actions against them, and they are required by law to abide by the terms of the repayment plan.

An online creditor’s ability to collect money after the initiation of a Chapter 13 filing by the debtor, like other creditors, will largely depend on the nature of the debt. Due to the speed and anonymity of electronic commerce, most online creditors will be unsecured. In order to participate in the bankruptcy process to ensure some level debt recovery, any unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. With general creditors this does not present an issue, but because of jurisdictional barriers created by electronic commerce, this requirement is often not met.

An online creditor must exercise an extra level of due diligence when attempting to collect on past due accounts. While Chapter 13 requires that a debtor list all debts and creditors at the beginning of the process, it is possible for a creditor to not be notified due to distance or other jurisdictional issues. Failure to take notice of a claim may preclude the creditor from collecting any of the money due.

Chapter 13 is often a viable alternative to Chapter 7 bankruptcy for those people who can maintain a certain level of income. Whether attempting to collect on a Chapter 13 bankruptcy filing, or contemplating seeking the protection offered by filing, only an experienced bankruptcy lawyer can accurately guide you through the difficult process. A qualified bankruptcy attorney is both the creditor’s and the individual’s most useful tool in being able to navigate the bankruptcy process. As electronic commerce continues to expand, Chapter 13 online creditors will only increase in proportion. Due to the unique obstacles and challenges presented by the online creditor collection process, an experienced attorney may be the only way to ensure Chapter 13 protection or collection.

This article was drafted by Nick Deleaunt, for the bankruptcy lawyers at Goldstein and Clegg, LLC.

By: Nicholas Deleault
This article was drafted by Nick Deleaunt, for the bankruptcy lawyersbankruptcy lawyers at Goldstein and Clegg, LLC.

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On October 17, 2005 the world of bankruptcy law changed for the worse. Or did it? Is it really that much harder to file bankruptcy under the new bankruptcy law?

In the run up to the effective date of the new law, bankruptcy filings increased to record numbers in virtually every bankruptcy court district in the United States. Scary terms like "means test" and "bankruptcy credit counseling" seemed to drive people out of the wood work to beat the deadline.

After the law changed, many lawyers who used to file bankruptcy under the old law simply gave up filing bankruptcies because of a perception that the new bankruptcy law is overly complicated and time consuming.

Filing bankruptcy under the new bankruptcy is a bit more complicated and is certainly more time consuming, but with effective bankruptcy counsel, successfully restructuring your debt is still possible.

One of the most feared provisions of the new law is the bankruptcy means test. The bankruptcy means test is a calculation used to determine what type of bankruptcy a debtor might file. To simplify things, the bankruptcy means test requires a debtor considering bankruptcy to be matched against the median state income of the debtor's state of filing.

Debtors who are over the median state income may have a more difficult time filing a chapter 7 bankruptcy and might have to file a chapter 13 bankruptcy which requires a monthly repayment to the bankruptcy court. The bankruptcy means test will not prevent a debtor from filing a bankruptcy; it will only help determine what type of bankruptcy must be filed.

Most bankruptcy attorneys are finding out that the majority of people considering bankruptcy seem to be under the median state income initially and mostly unaffected by the bankruptcy means test.

Another requirement that seemed to strike fear in the hearts of debtors and attorneys everywhere is "bankruptcy credit counseling". The new bankruptcy law requires every debtor considering bankruptcy to complete bankruptcy credit counseling within the six months preceding the filing of the bankruptcy.

Most bankruptcy attorneys are finding that the counseling requirement has not been much of an issue. Most debtors choose to do a brief telephone counseling session and the maximum cost to the debtor is set by law and cannot exceed $50.00. For a list of available bankruptcy credit counselors, check BankruptcyCreditCounselors.com.

Don't let the new bankruptcy law scare you. If you need help, get help. Consult with an expert bankruptcy attorney in your area that offers free consultations to explore all of your bankruptcy options.

Tommy C. Smith, III is a Virginia Bankruptcy Attorney and has blogged about the new bankruptcy law on his blog, Blawg De Novo. His articles have also been published at BankruptcyHelpOnline. org.