Some people plan for bankruptcy for months before they finally take the final step of filing paperwork. Others file as soon as they think of bankruptcy as a solution because they need immediate help. Bankruptcy is not only a long-term solution to overwhelming debt. It is also an immediate shield against most collection activities.
Those struggling with debt may turn to bankruptcy for help when a creditor takes aggressive steps in their effort to collect, like filing a civil lawsuit or announcing the intent to foreclose on their home. When you file for bankruptcy, you receive an automatic stay on all collection activity until the courts review your filing. That will mean an immediate end to the collection activity.
For many people, the protection of an automatic stay is what convinces them that filing for bankruptcy is the right solution.
The automatic stay isn’t permanent
Although it takes effect the same day that you file and can lead to the cessation of collection calls or the dismissal of a pending debt-related lawsuit, an automatic stay isn’t permanent. When the courts dismiss or approve your bankruptcy filing, the protection of the automatic stay will end. Of course, if you have already discharged your unsecured debts, you won’t have to worry about collection activity resuming.
Individual creditors can also petition the courts during your bankruptcy and ask for the right to continue collection activity despite the automatic stay. In other words, you could face collection efforts, like vehicle repossession or a lawsuit, even after you file.
There are limits on the automatic stay, as well. It will not retroactively help you if a creditor has a garnishment against your wages or has already repossessed collateral property. Learning more about the basics of bankruptcy can help you maximize the benefits derived from filing.