You are considering filing bankruptcy. You cannot meet all of your financial obligations and the creditors collecting the debt are making your life a living hell. Of course, you have done some research on your own and talked to a couple family members about help.
You may have heard about this thing called "the automatic stay." You may have heard that when you file, it goes into effect. What does that mean? Will it help? Learn more about the automatic stay and what it does the moment you file a bankruptcy.
Creditors stop calling
The collection companies for your credit cards, mortgage, car payment or school loans have to stop calling. Once they receive notice from the courts that a bankruptcy is pending, the creditors are compelled by law to stop sending you collection notices and ringing your phone every single day.
You can see faster results if you have a bankruptcy attorney contact the companies and provide written documentation of your filing.
Wage garnishment is lifted
While the bankruptcy is in the courts, your wages will no longer be garnished by agencies trying to collect on a debt. You can find some relief by being able to cash your own paycheck and pay for basic needs like food and clothes. However, be aware that the stay does not affect child and spousal support.
Foreclosure and repo's are halted
Once the bankruptcy is filed, foreclosure proceedings are paused until the bankruptcy is cleared or the secured lender files a motion to lift the stay. However, you will have bought yourself some time to determine which of your property is to be included in the bankruptcy proceedings and to work with lenders on a modification of the terms of your loan.
Thirty days to make decisions
The filer has thirty days to work with the court and file a Statement of Intentions. The statement tells the court what steps you are prepared to take and what property you are willing to surrender to discharge your debts.
While you are not going to be able to stop all the creditors from receiving some payment, at least you will have some time to make without being bullied by endless phone calls and demand notices.
There are exceptions to the automatic stay of which you should be aware. Secured lenders, such as those who hold your mortgage or car loan, can file for a lift of the stay in their particular case. They are more likely to do this if you have little equity in your home or car.
When you have exhausted all your means of meeting your creditors' demands and have no other means, filing bankruptcy will give you some peace of mind when the automatic stay is put in place and the collection calls stop. It can even be used as a proactive measure to get things under control.
Of course, knowing whether bankruptcy is right for you is a case-by-case decision. Get advice from an attorney before taking any action to relieve your debt.