People file for bankruptcy for a variety of reasons, one of which is that they can’t handle constantly being contacted by creditors who want to collect on debts. When you know you don’t have the money to pay those accounts, it can be stressful and disheartening to hear from creditors.
Filing for bankruptcy is a legal way for you to get financial relief. Once you file for bankruptcy, the court will issue an automatic stay. This is a legal order that forbids creditors from contacting you in an effort to collect debts. Having relief from contact can give you a chance to set a solid plan to reclaim your finances
Why is the automatic stay important?
The automatic stay is important because it takes away the possibility of a creditor receiving payments they aren’t entitled to receive. It’s highly unlikely that creditors will receive full payment for the debts included in the bankruptcy. Without being able to go directly to you for payment, they have to rely on the bankruptcy trustee’s payments.
There are some exceptions to the automatic stay. For example, creditors can sometimes petition the court to lift the automatic stay if you have a previous bankruptcy or if collateral may decrease during the bankruptcy.
You shouldn’t file bankruptcy solely based on the issuance of the automatic stay. Instead, take the time to consider the full scope of how the bankruptcy will impact your finances now and into the future. This may be easier if you work with someone who can walk you through what to expect.
