What Happens When I File Bankruptcy?

Below is a partial transcript of David M. Siegel as he talks bankruptcy law for the Legal Action television show which airs on Comcast Cable throughout Chicago and its suburbs:

Interviewer: Let me ask you this.  I work at a bank so is my employer going to find out if I do a bankruptcy?

David Siegel: Your employer’s typically not going to know about your bankruptcy unless he or she needed to be notified.  For example, if a client is being currently garnished and they come in for a Chapter 7 or a Chapter 13 and they want to stop that garnishment. We’re going to have to send proof of the bankruptcy filing over to the payroll department; so in that limited circumstance your job is going to find out.  But typically your job doesn’t need to know.  They’re not listed as a creditor, they don’t get notice of the bankruptcy, you’re not going to have to disclose it if you’re already working there.  So that is a major concern that some people have, but typically your friends, your family, your job they’re not going to know about your bankruptcy.  Even though it’s public record it’s primarily private in nature.

Interviewer: What’s going to happen – you talked a little bit earlier about an automatic stay that certain creditors can’t continue to collect on a debt and they have to stop.  What happens if somebody calls me after I file?

David Siegel: You’re going to continue to get collected upon; is that what you’re saying?

Interviewer: Right.  What happens if they continue to call me at work, and they continue to call me at home, and they continue to try to garnish my wages?

 David Siegel: If you’ve already filed for bankruptcy and you have the case number and the data filing and the automatic stay a creditor – typical creditor cannot pursue collection actions, and if they do your attorney has the ability to one, send them additional information to get them to stop; and two, could bring an action for sanctions for violating the automatic stay.  It goes totally against the fresh start principle that once you file you’re free from collection activity.  Most creditors know this and they don’t want to fall victim to a bankruptcy judge entering a monitoring sanction.  But every once in a while you get either a rogue collector or an individual collector who doesn’t really know the laws and they continue to pursue the debtor.  I typically can get that to stop with a phone call or a letter, but on rare occasion we do have to bring it back to court and hammer them with a sanction.

Interviewer: To get them, and this is the principle difference between just a consolidation place and the protection of the federal bankruptcy laws.

David Siegel: You talk – there’s a misconception out there that debt consolidation is going to bring this tremendous protection and consolidate all the debt, and give you one place to pay, and lower your amount.  The problem with that is debt consolidation does not have the backing of the federal law behind it. So if eight out of your ten creditors decide to take the payment plan, but two don’t, and those two sue you and garnish your wages you’ve accomplished nothing.  Plus in the past a lot of debt collection or debt consolidation companies have not really helped the debtor in the long run.  The debtor has made payments that have gone towards creditors, but also to the collection agent – the collection firm.

Interviewer: As a fee.

David Siegel: As a fee and it hasn’t really brought the relief that the debtor really can get by filing an actual bankruptcy case.


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