If you have filed for debt relief under a specific U.S. Government program, such as Chapter 7 or Chapter 13, you have certain provisions as an individual or business owner. It is important to research California laws before filing a petition to determine whether you can meet eligibility requirements, as well as which type of debt relief best fits your needs. One of the provisions of bankruptcy is a legal injunction known as an “automatic stay.”
An automatic stay prevents creditors, government entities and other individuals from suing you to collect debt during bankruptcy proceedings. The injunction does not eliminate debt. This means that, if you legitimately owe someone money, such as a mortgage company, you must still satisfy the debt at some point, either through bankruptcy or after proceedings are complete, if the debt is not dischargeable through Chapter7 or Chapter13.
Section 362 of the US bankruptcy code addresses automatic stay
Under U.S. bankruptcy code 362, an automatic stay takes effect as soon as you file a Chapter 7 or Chapter 13 petition. This means that creditors or collection agencies must stop contacting you. It also means that, if lenders have initiated foreclosure against your home, they must halt the process.
If a lender or collection agent or other entity continues to pursue contact with you to collect a debt while an automatic stay is active in your bankruptcy case, you must file a lawsuit.
Do you owe alimony or child support?
If the court has ordered you to pay child support or alimony, you must continue to make payments even if you have filed for bankruptcy in California. Such debts are not dischargeable through bankruptcy, nor are they affected by an automatic stay injunction. There are other types of debt that are not dischargeable through bankruptcy, as well, such as compensation the court has ordered you to pay because of a personal injury claim.
Determining if filing for bankruptcy is a viable option
If the only debt you owe is related to child support or another non-dischargeable debt, it wouldn’t make much sense to file for bankruptcy to activate an automatic stay. However, if you have fallen behind on your mortgage or credit card debt has gotten out of hand, and you’re at risk for foreclosure or repossession of assets, you may want to explore Chapter 7 or Chapter 13 bankruptcy as a viable option to obtain debt relief. Each program has its own eligibility requirements that you must meet to qualify.
If you’re not familiar with California bankruptcy laws or are unsure of the implications that filing a petition might have on your finances and in your daily life, it’s best to seek experienced guidance and support before submitting any legal documents to the court.