Realizing that you don’t have enough money to pay all your bills is hard to handle, especially when it occurs on a consistent basis. Eventually, you may realize that you need to do something to get a hold of your financial situation.
One option that’s possible is bankruptcy, which is a legal avenue for you to get debt relief. The way this happens depends on the type of bankruptcy you file. A Chapter 7 bankruptcy is known as a liquidation bankruptcy and Chapter 13 is known as a wage earner’s bankruptcy.
When is the automatic stay initiated?
Bankruptcy triggers the automatic stay, which forbids creditors from being able to try to collect debts. This is done so that all creditors are in equal positions for collecting money from the bankruptcy trustee. In most cases, creditors won’t receive full payment during the process and will have to charge-off some of the balance. The automatic stay stops creditors from trying to circumvent the process in an attempt to receive more than their rightful payment.
The automatic stay also gives you some relief during the bankruptcy process. You won’t have the stress of dealing with creditors, so you can focus on rebuilding your finances and getting back on track.
You shouldn’t file bankruptcy just because of the automatic stay, so it’s important to consider each option you have available. Working with someone who’s familiar with the bankruptcy process may be beneficial as you’re making your decision. This can also help you to learn more about your rights and responsibilities during bankruptcy.
