People often try to avoid answering the phone or checking the mail when they have creditors hounding them for money. Those interactions with a creditor can make a nice day turn sour quickly, especially if you know that you can’t afford to pay them anything.
One important benefit of bankruptcy is that the court issues an automatic stay when you file. This prohibits creditors from trying to collect on debts while your case is moving through the bankruptcy process. This also provides you with a break from the collection attempts since you’re making efforts to reclaim your financial future.
Why is the automatic stay important?
The automatic stay is important because It takes away the possibility that a creditor will be able to get more than the pay they’re due through the bankruptcy court. All creditors are treated according to their priority level when it’s time to get payments.
Creditors typically won’t receive full payment for the accounts once the debtor files for bankruptcy. Without the automatic stay, they could try to seize assets to cover the accounts they hold. This would leave other creditors with a lower payment than they should receive.
There are limited cases in which the automatic stay might be lifted, which would allow creditors to continue collection efforts. The lift must be issued by the court in order to be valid.
Bankruptcy is a legal way that you can receive a fresh financial start. Working with someone who’s familiar with the bankruptcy system and can help you to determine how to handle your case.