Often times people who begin getting behind on their bills do not believe they will have to file for bankruptcy. They make every effort to pull themselves out of debt and get on top of their bills. At first it may seem feasible. Eventually, the amounts owed may pile up faster than they can be repaid, and the past due amounts may grow each month. There will be calls from creditors and collection agencies threatening legal action if past due bills are not paid. There will be letters from creditors and collection agencies doing the same. It is often at this point that people begin to consider filing for bankruptcy.
The Main Bankruptcy Players and the Process
In a bankruptcy proceeding, the person owing the debt is called the “debtor” and the person or entity to whom the debt is owed is called the “creditor.”
There are different types of bankruptcy petitions that may be filed under different chapters of the Bankruptcy Code. Regardless of the type of bankruptcy, it begins with the debtor, or the debtor’s attorney, filing a bankruptcy petition.
The ultimate benefits of bankruptcy will either be the extinguishment of many, if not all, debts and an opportunity to rebuild your credit and pay fresh bills, or it will be an opportunity to reorganize or restructure payments owed in order to be able to pay past debt. Most bankruptcies filed by individual people extinguish, or discharge most debt.
An immediate benefit of filing bankruptcy, however, is the automatic stay ordered.
The Automatic Stay Stops Collection Efforts During the Bankruptcy Procedures
The filing of a bankruptcy petition automatically stays (stops) most actions, including collections, against the debtor or the debtor’s property. It is called “automatic” because the stay begins automatically at the time the bankruptcy case is filed with the Clerk’s Office. Once the stay is in place, creditors are prohibited from taking certain actions against a debtor.
A creditor matrix is a list of the names and current addresses of all creditors and other parties that should have notice of a bankruptcy. It is prepared by a debtor or the debtor’s attorney and must be filed at the same time the bankruptcy petition is filed.
It is from the creditor matrix that the Clerk’s Office will determine the identity of your creditors and inform them of the automatic stay. As a debtor, it is your responsibility to ensure you have listed current, valid addresses for your creditors. If mail sent by you or the Clerk’s Office regarding your bankruptcy comes back as “undeliverable,” it is your responsibility to try to find a good address for the creditor and notify the Clerk’s Office of the good address. Additionally, if you obtain a different address for a creditor after you file your bankruptcy, you must notify the Clerk’s Office in writing of the new address.