What To Expect From Creditors During Bankruptcy

When a debtor files Chapter 7 or Chapter 13 bankruptcy, there are a few known actions that their creditors will take. Let's take a look at a few:

1. When a debtor files bankruptcy, their creditors are required by law to stop all collections actions. This means that the creditor cannot call or write the debtor in an attempt to collect on the debt. However, sometimes the creditor will mistakenly (or purposefully) contact the debtor demanding payment despite their bankruptcy filing. If this happens, do not make any payment, inform them you are in bankruptcy and inform your bankruptcy attorney of the incident. The attorney will inform the court that the creditor is violating the automatic stay and if it is discovered that the creditor is maliciously flaunting the bankruptcy automatic stay they could be sanction and/or the debtor could be awarded damages.
2. Once a creditor discovers that the debtor has filed bankruptcy, they will file a claim with the bankruptcy court. Debtors should review these creditor claims with their attorney and challenge any errors. Sometimes debts are inflated or in rare cases a debt you don't really owe may be filed with the bankruptcy court. If this happens don't delay in challenging the false claims, never assume that it doesn't matter because you will be "discharging them in bankruptcy anyway."
3. Now that the recession has dragged on for a few years now, many creditors are finding more reason and incentive to challenge the bankruptcy discharge of debtors. They are especially eager to challenge the discharge of debtors who don't have a bankruptcy attorney to help them. Not fair, but it's what's happening. Reasons for creditor challenges to a bankruptcy discharge can range from accusations of illegal pre-bankruptcy asset transfers to outright fraud. If you are facing a motion to deny your bankruptcy discharge, speak with a bankruptcy attorney immediately.
4. If a debtor owns a home which is at risk of foreclosure, they can expect their mortgage lender to ask for relief from the bankruptcy automatic stay. The creditor will most likely argue that the debtor isn't able to pay the mortgage and has no ability to fix their housing issue in bankruptcy; therefore they should be allowed to proceed with foreclosure. However, if a debtor does have the intention of keeping their home using bankruptcy, they should work with their attorney to fight the request for relief from the automatic stay. If a bankruptcy trustee is convinced that the debtor has at least the intention of trying to keep their home in bankruptcy, they most likely won't grant any relief from the automatic stay.