There are consumer laws that limit what collection activity companies can engage in when you can’t repay your debts quickly or when you miss payments. For example, businesses cannot threaten you or call you in the middle of the night, harassing you and waking you up from a night of sleep that you need to do your job properly the next day.
However, creditors and collection agents can call you at home, attempt to garnish your wages, place a lien on your personal or real property, foreclose on your home or repossess assets that secure a loan, such as a vehicle. Any of these collection efforts could have a serious, negative impact on your finances and credit.
If you have received notice of a pending, aggressive attempt to collect an outstanding debt, filing bankruptcy could halt that collection effort and give you more options for regaining control of your financial situation.
When you file for any kind of bankruptcy, you receive an automatic stay
Individuals and businesses have the option of filing for bankruptcy protection if their level of debt becomes unsustainable. There are multiple forms of bankruptcy available, each of which may offer different benefits to individuals or businesses currently going through a difficult financial time. For the average individual, Chapter 7 or liquidation bankruptcy and Chapter 13 bankruptcy are the most common forms.
Regardless of what kind of bankruptcy you file, you receive the protection of an automatic stay as soon as the courts accept your initial filing. An automatic stay orders the immediate end to any collection activity, including phone calls, letters, pending lawsuits or even foreclosure and repossession efforts. You can halt the immediate collection efforts and then use the bankruptcy as a means to improve your financial circumstances and avoid the loss of your assets or the garnishment of your wages.
Bankruptcy can help you get your finances under control
Once you have the protection of an automatic stay, it will be easier to make rational decisions about what to do with your income and how to handle your outstanding debt. When you don’t have to worry about a potential lawsuit or the repossession of the vehicle you rely on to get to work, you can make a better decision about your budget and about whether you want to reaffirm certain debts, such as your car note, during the bankruptcy.