Realizing that you have more debts than income is an incredibly stressful situation, but it’s one that you can use as a call to action. Once you come to the conclusion that you need to do something, the question becomes what you should do. One option that you have is to file for bankruptcy.
Bankruptcy is a legal way for you to regain control of your finances. There are two primary types for consumers—Chapter 7, which is known as the liquidation bankruptcy, and Chapter 13, which is known as the wage earners bankruptcy. In both of these forms of bankruptcy, you will have very specific benefits, including the automatic stay.
What’s the purpose of the automatic stay?
The automatic stay is a court order that forbids creditors from trying to contact you in an attempt to collect money. This includes all forms of communication, such as mail, phone calls, text messages, and in-person.
The automatic stay provides relief for you from creditor contact, which can make it a little less stressful to deal with your finances during bankruptcy. But it also serves another purpose.
It’s highly unlikely that creditors will receive full payment on the account once you file for bankruptcy. Taking away the possibility of collecting money from you means that all your creditors are on a level playing field. This means that each creditor will only receive what they’re due based on what’s set by law.
Bankruptcy is a major financial decision, so it’s critical that you understand the benefits and responsibilities that come with it. Working with someone who’s familiar with these cases can help to guide you through the process so you can get started on your fresh financial start. It’s best to do this once you find out that your finances are in trouble.
