I get this question often, and it’s a good one. First, there are several ways a person can file for bankruptcy. Chapter 7 bankruptcy is called liquidation bankruptcy because the bankruptcy trustee may take and sell (“liquidate”) some of your property to pay back some of your debt. However, you can keep property that is protected (or “exempt”) under state or federal law. In Chapter 13 bankruptcy, you keep all of your property but must make monthly payments over three to five years to repay all or some of your debt. A Chapter 13 bankruptcy is also known as a consumer reorganization.
Under either chapter, a consumer who files for bankruptcy protection obtains the benefit of the automatic stay as soon as the bankruptcy petition is filed. The automatic stay prohibits most creditors from continuing with collection activities, which can provide welcome relief to debtors as well the opportunity to regroup during bankruptcy. This means no more calls from creditors, and any efforts to foreclose on your home or repossess any of your property must cease until the creditor receives permission from the bankruptcy court to do so. Most individuals facing financial crisis need some time to take stock of their financial condition and map out a path to solvency. The automatic stay is an important feature in stopping intrusive creditor calls and collection attempts while the consumers figure out their next steps.
Filing for bankruptcy is a serious undertaking that can have a lasting impact on your financial future. Hiring a knowledgeable bankruptcy attorney will give you peace of mind and information about how to move forward into financial freedom. For more information about the bankruptcy process, give us a call at 713-574-8626. We can discuss your finances and help you get control of your life.