There was concern on the part of some owners over how Navarro made his money — a piece of it was in debt collection — and a case he settled in New York in 2014 over «repeatedly bringing improper
debt collection actions against New York consumers.»
According to bankruptcy law, filing a bankruptcy petition initiates an «automatically stay» which stops
most collection actions against the debtor or the debtor's property (11 U.S.C. & 362), although the automatic stay will not stay certain types of actions and for some situations it may only be in effect for a short time.
Used to be that conventional wisdom counseled lawyers not to initiate
collection actions against clients on the chance that they might file a retaliatory malpractice action.
If you and your spouse owe debt on credit cards, car loans, or medical bills, creditors can still
undertake collection actions against you even if a majority of the debt is your spouse's or he or she defaults on payments he or she has agreed to pay off.
In both cases, if a creditor has
taken collection action against you (even the Canada Revenue Agency) or has imposed an enforcement measure such as a wage garnishment or frozen your bank account, this is stopped once a bankruptcy or consumer proposal is filed.
Medical debt collections are incredibly common; one study found that in 2010, 30 million Americans had
collection actions against them for unpaid medical bills.
This stay prevents your creditors from taking
any collection action against you during your case.
Thanks to bankruptcy's automatic stay, creditors are prohibited from making
any collection actions against you while your case is pending.
Sam Glover: I suppose when people ask if they should file
a collection action against their clients, maybe the first question should be, does the client owe you more or less than your deductible?
This is the official order that prohibits your creditors from taking or continuing
any collection actions against you which means that, by law, your creditors must put a halt to phone calls, lawsuits and repossession claims against your property.
The automatic stay, which takes effect as soon as a bankruptcy case is filed, prevents creditors from taking
any collection action against the filer.
Upon your bankruptcy filing, the court will appoint a bankruptcy trustee who will enter an order for an automatic stay, which essentially stops
all collection actions against you during your Chapter 7 bankruptcy case.