Personal bankruptcy itself is an important protection for anyone facing overwhelming debt and the stress associated with it. If you are struggling with debt and are considering ways to enjoy a fresh financial start, bankruptcy and its protections may be an option.
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The automatic stay
Various protections are built into Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy exemptions, for example, provide important protections protecting property from the bankruptcy process in some instances. Another significant protection available in all types of bankruptcy is the automatic stay.
The automatic stay goes into effect once the filing party has filed for bankruptcy protection. It lasts during the bankruptcy process unless it is lifted by the court. It prohibits creditors from proceeding with any collection activities during the bankruptcy process. This means that creditors will have to stop contacting you while you are working out your repayment plan as part of the Chapter 13 bankruptcy process or while you are going through the liquidation process during Chapter 7 bankruptcy.
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Chapter 13 and Chapter 7
In general, Chapter 13 bankruptcy is considered a reorganization bankruptcy process during which the filing party reorganizes their debts into a manageable repayment plan over 3 to 5 years. Chapter 7 bankruptcy is considered a liquidation bankruptcy process during which non-exempt assets are liquidated to repay creditors.
Considering bankruptcy can be a tough decision but it can provide debt relief with important protections for you along with way. Both Chapter 7 and Chapter 13 personal bankruptcies can provide a clean financial slate without requiring you to start over from scratch which is why being familiar with the protections of bankruptcy is so important.
