Most people who file for bankruptcy do so because their financial circumstances leave them with very few alternative options. Some people have to file after their debt slowly increases month after month for a protracted amount of time.
Other people can have a sudden need for bankruptcy protections, such as when they incur large amounts of debt in a short amount of time, possibly due to a catastrophic medical event or accident. Regardless of why you find yourself considering Chapter 13 bankruptcy, you will likely benefit from one of its most important protections, known as the automatic stay.
What is an automatic stay?
There is a lot that must happen between when you file for bankruptcy and when you receive your discharge. You have to attend the creditors meeting and successfully complete a repayment plan. In the case of your mortgage and car loan, you may also need to reaffirm your debts as a way to retain the assets you have already invested in.
If you had to wait until the discharge to receive protection from your creditors, there's a good chance you would lose your vehicle or your home if creditors have begun repossession or foreclosure proceedings. Thankfully, an automatic stay occurs when you file for bankruptcy, not when you receive your discharge. It prevents creditors from taking additional collection activity against you.
Once you tell a lender you filed for bankruptcy, they should leave you alone
Dealing with the constant phone calls and letters from your creditors can be one of the most difficult parts of falling behind financially. When you receive your automatic stay, you have the right to tell your creditors to stop calling. After all, they can't attempt to collect on the debt anymore until the courts review your request for bankruptcy protection.
That can mean no more phone calls, no more frightening letters and no more risk of losing your house until after you've moved forward with bankruptcy. It can also mean the end of a lawsuit or an attempt to garnish your wages.
An automatic stay is only the first step
The protections of an automatic stay are likely exactly what you need if you feel overwhelmed by debt and creditor collection attempts. However, that automatic stay only remains in effect until the courts determine whether you should receive bankruptcy protections. If the courts do not approve your request, collection activity can resume until you correct your paperwork and attempt to file again.
In the event of a discharge, you won't have to worry about creditors attempting to collect on unsecured debts, as they will no longer have the right to collect on a discharged debt. The more serious the actions taken by your creditors, the more important it becomes for you to take decisive and quick action.
Knowing when you need to file for bankruptcy protections can be a hard call to make, but the right timing could protect your most important asset. Talking about your situation with an attorney can be a good first step toward regaining control over your financial circumstances.