The process of bankruptcy takes quite some time to complete. Depending on the chapter of bankruptcy that you pursue, it might be several years between when you initially file your paperwork requesting bankruptcy relief and when the courts finally approve the discharge of the remaining balance on your unsecured debts.
If you had to wait until your discharge to have legal protection from collection activity, filing for bankruptcy would often offer little support for those enduring financial hardship. Thankfully, there is a more immediate form of debt relief after a bankruptcy filing.
The same day that you file, your automatic stay takes effect. What are the three primary benefits you drive from that automatic stay?
The cessation of collection calls
Have you reached a point where you hate to hear your phone ring because you always assume a creditor has a complaint about a past-due account?
When you file for bankruptcy, your creditors will need to stop reaching out to you regarding your accounts until the resolution of your bankruptcy filing.
An end to pending litigation
If one of your creditors filed a lawsuit against you because you had missed several payments, the consequences of that lawsuit could be severe. A successful debt-related lawsuit could lead to the garnishment of your wages or a lien against your most valuable property.
The courts will typically dismiss all pending creditor lawsuits when someone files for bankruptcy. Creditors can go to court to ask to continue collection activity or for the courts to exclude them from your discharge. In most cases, however, the lawsuit will end with your bankruptcy filing.
The protection of your collateral property
Two of the resources you most depend on in daily life, your home and your vehicle, might actually be financed assets. They serve as collateral for the loan that you used to purchase them. When you fall behind, the lender could foreclose on your home or repossess your vehicle. The automatic stay in bankruptcy can prevent repossession and at least temporarily halt the foreclosure process.
Understanding the impact of your automatic stay could help you realize it is time for you to file for bankruptcy.