Automatic Stay Puts Breaks on Debt Collection

For burdened debtors, abusive debt collection can be a nightmare. Or, if not a nightmare, then at least what wakes them up from a nightmare. Calling in the middle of the night is one of many cases of abuse aggressive debt collectors engage in. Unfortunately, the law governing debt collection is outdated and does not address the many abuses debtors are now facing.

Recognizing the problem, the Consumer Financial Protection Bureau, a federal agency created by the 2010 Dodd-Frank Act, has reportedly requested public comments regarding debt collection abuse. The comments will presumably be incorporated into emerging regulations designed to protect consumer’s rights while allowing creditors to collect what they are owed.

When an individual files for bankruptcy protection, one advantage of doing so is the automatic stay. This is an order issued by the bankruptcy court to creditors under which creditors are not allowed to initiate any collection attempts. The stay begins when the bankruptcy petition is filed.

There are certain exceptions to the automatic stay. Secured creditors, for example, are able to petition the bankruptcy court for relief from the automatic stay. To obtain relief; the creditor has to make a showing of cause. One common scenario is when a debtor files for bankruptcy after having fallen behind on mortgage payments. Often, the lender is able to obtain relief from the automatic stay after a short period of time and may then pursue foreclosure, if it so wishes.

Those who are dealing with burdensome debt should speak with an experienced bankruptcy attorney to determine their options and have their case evaluated. Bankruptcy protection is not the best solution for everybody. Those for whom it is, though, can benefit greatly.

Fox Business, “Uncle Same Wants…Your Gripes About Debt Collectors,” Gail Buckner, December 16, 2013.