Actually, you don't even need to file for bankruptcy to prevent creditors from calling you. All you have to do is inform them in writing that you don't want them to call you. All they can do after that is to send you a final demand letter before filing a lawsuit against you.
Nevertheless, once you do file for Chapter 7 bankruptcy, your creditors, secured and unsecured, are automatically precluded from trying to collect what you owe them. It's called "automatic" stay because court issues this injuction on its own initiative without you even asking for it. This is to give you some peace of mind and to ensure that the bankruptcy trustee, and not your creditors, will decide what you get to keep. Even non-dischargeable loans are subject to the automatic stay.
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When the stay applies
Credit card, medical debts, attorney's fees. Creditors cannot file a lawsuit against you or proceed with the old one.
Utility disconnections. Utility companies may not cut off your service for 20 days after you file.
Overpayment of public benefits. Government cannot reduce your current payments to make up for what you owe them.
IRS liens.
Foreclosures are initially stayed but will be lifted if you've already filed for bankruptcy within the last two years and the court allowed the lender to proceed in that previous case. This is done to prevent people from filing for bankruptcy just to prevent foreclosures. However, the court will likely lift the stay if the foreclosure will ultimately occur. If keeping your home is a priority, Chapter 13 bankruptcy might be a better option.
When the stay does not apply
Certain types of collection actions against you are not prohibited by the automatic stay:
- Tax proceedings, such as IRS tax audits or demands for payment.
- Most divorce and child support proceedings.
- Pension loans.
- You had a prior bankruptcy case pending within a year before filing. In this case, automatic stay will be effective for 30 days only in the present case.
- You've missed the deadlines for dealing with secured debts (where some of your property is a collateral in case you don't pay).
- Evictions, if the landlord already got a judgment against you before you filed for Chapter 7 bankruptcy or the landlord claims you've endangered the property or used controlled substances on the property. Otherwise, automatic stay does apply but the landlord is likely to eventually prevail on a motion to lift it and evict you.
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