Jeffrey M. Rosenblum, P.C.
A Fresh Start

Filing a bankruptcy and debt collection efforts

New York residents struggling to cope with an unmanageable financial situation are likely familiar with the sometimes dubious practices of debt collectors. Collection agencies are notorious for their relentless pursuit of unpaid bills, but they are required to operate within boundaries established by the Fair Debt Collection Practices Act. When collection efforts breach these rules, debtors may file a complaint with the Federal Trade Commission.

Debtors can also put an end to harassment from debt collectors by filing a Chapter 7 or Chapter 13 personal bankruptcy. Once a bankruptcy has been filed, debt collectors are no longer able to contact debtors directly. Future communication must be made with the debtor's bankruptcy attorney, and efforts to garnish the paychecks or levy the bank accounts of debtors must also cease. This is because a bankruptcy filing places a stay against collection efforts made against the debtor's property.

Creditors who hold debts secured by property may ask the bankruptcy court for an order of relief. If this is granted, they may pursue foreclosure or a replevin action. A Chapter 13 bankruptcy reorganizes debts and requires the debtor to pay some of the amount they owe back over a period of between three and five years. However, creditors must file a Proof of Claim within a strict deadline if they wish to have the debt concerned incorporated into the Chapter 13 payment plan.

There are many misconceptions and myths surrounding bankruptcy that may prevent New York residents struggling to cope financially from pursuing debt relief. An attorney could explain the differences between a Chapter 7 and Chapter 13 bankruptcy and the ways that they differ from debt consolidation or settlement. An attorney may also assess an individual's financial situation to determine what kind of bankruptcy filing they qualify for.Source: The Federal Trade Commission, "Fair Debt Collection Practices Act," Accessed on August 14, 2015

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