Filing bankruptcy is thought of as a last resort due to its negative impacts on your credit score and ability to take out loans in the future. However, it does have its benefits under certain circumstances.
Depending on the type of bankruptcy you need to file for, doing so can stop a lot of detrimental things that might be going on in your life, including:
- Other debt collections
- Creditor harassment
The automatic stay is part of the U.S. bankruptcy law that stops creditors and other agencies from collecting debt payments from you for a period of time. This stay begins right when you file for bankruptcy, whether you are a business or individual and no matter what chapter you file for. Under the automatic stay, all of the debts you owe are essentially put on hold, including the creation or enforcement of a property lien. You even have the right to sue a creditor who continues to harass or ask you for payments after you have filed.
The automatic stay generally lasts throughout your bankruptcy case. An exception to this rule is if you have two cases going at once, such as if you begin with a Chapter 7 and then follow it with a Chapter 13. The stay would only last 30 days in the Chapter 13 case.
Home Foreclosure and Asset Repossession
Within the laws of the automatic stay, you will not have to worry about your home being taken away or large assets being repossessed, such as your vehicle. Mortgage companies, auto loan providers and any other debts you hold including credit cards and student loans are all put on hold while you and the court decide whether to erase the debt or restructure payments to better suit your financial situation.
An exception that could be made is if you fall off your payment plan. In this case, a lender may file a motion for the stay to end so they can resume foreclosure and repossession.
Keep in mind that certain types of payments are not put on hold. Speak with a bankruptcy attorney to learn what you will continue to be responsible for after a stay is in place. Some payments you can expect to continue paying include:
- Child support
- Loans from pensions
Understanding the provisions within the bankruptcy law is important to ensure your rights are protected and so you can get back on your feet after the proceedings are finished. Consult with an experienced bankruptcy lawyer to be sure your case is handled fairly.