What should collections managers do if a debtor files for bankruptcy?

When a debtor files for bankruptcy, collections managers are required to cease all collection activities and seek legal counsel. This is primarily due to the legal protections granted to debtors under bankruptcy law, which includes an automatic stay that prevents creditors from pursuing collection efforts once a bankruptcy petition is filed. Continuing any collection activities during this period could lead to legal complications for the collections manager and the organization they represent.

Seeking legal counsel is advisable because bankruptcy can be complex, and different types of bankruptcy (such as Chapter 7 or Chapter 13) come with specific rules regarding creditor rights and debt recovery. Legal experts can provide guidance on how to navigate the process properly, including whether and how to file a claim against the debtor in bankruptcy court, ensuring compliance with all necessary regulations.