Last time, we looked briefly at the increased incidence of medical debt collection litigation in states with low court filing fees. As we mentioned, debt collection litigation can be very difficult and disruptive to debtors, but it is something that can be addressed in the bankruptcy process.

Once a bankruptcy petition is filed, the bankruptcy court automatically issues an injunction which prevents creditors from engaging in any debt collection activities. This includes litigation, foreclosure, and garnishment, as well as ordinary debt collection activities. Once the injunction is issued, it becomes illegal for creditors to pursue collection activities and the court is able to step in and enforce the order against errant creditors. 

The reason for the automatic stay is that bankruptcy is intended to provide financially burdened debtors immediate relief so that they can establish a plan to address their debt. How exactly that is done, of course, depends on the type of bankruptcy for which the debtor files. In any case, though, the automatic stay provides much needed relief.

The automatic stay, it is important to note, is not an ironclad protection throughout the life of the bankruptcy. Bankruptcy law allows debtors to file for relief from automatic stay in order in some circumstances. This often happens when the debtor is behind on his or her mortgage payment and the bank gave notice of a pending foreclosure filing. So the automatic stay is not absolute protection, but it can provide significant relief to a struggling debtor.

Those who feel they may be headed toward bankruptcy and could benefit from the protections it offers should get in contact with an experienced bankruptcy attorney to have their case evaluated and determine the best course of action for their situation.