Creditors have several options to recoup their losses if you have defaulted on your debt obligations. They may seek a judgment in court to garnish your wages. If you have fallen behind on mortgage payments, then your creditor could foreclose on your home. These are only two possible examples of what can happen when you become delinquent or default on debts. However, you may be able to temporarily stop these collection attempts by filing for bankruptcy.
An automatic stay is issued after your bankruptcy application is filed. It can prevent collection attempts that include:
- Foreclosure: If you have fallen behind on mortgage payments, then the automatic stay could prevent your lender for foreclosing on your house. You could even file for bankruptcy at the last possible minute to prevent foreclosure.
- Wage garnishments: The automatic stay can stop most types of wage garnishments. For example, it could stop wage garnishments that resulted from defaulting on credit cards. It cannot stop wage garnishments for past due child support or alimony payments.
- Phone calls and letters: After filing for bankruptcy, creditors can no longer make phone calls or send you letters to collect debts. If you hire an attorney, then all contact from collection agencies must go through him or her.
- Vehicle repossession: The automatic stay can prevent creditors from seizing your vehicle. This could be especially useful if you rely on that vehicle to get to and from work.
- Eviction: Depending on the circumstances, the automatic stay could temporarily prevent your landlord from serving an eviction notice. However, this does not mean you should stop paying your rent.
Can I File for Chapter 13 Bankruptcy to Save My Assets from Creditors?
If you file for Chapter 13 bankruptcy, then you may be given the chance to save some of your most important assets. The automatic stay will not only prevent collection attempts, it could allow you to become current on your past due debts.
Chapter 13 bankruptcy allows you to pay back creditors over a three to five-year repayment plan. After completing the repayment plan, you may keep your home or vehicle. However, Chapter 13 bankruptcy is only an option for people with a regular source of income. Chapter 7 bankruptcy is another option. Although it is often called a liquidation bankruptcy, Chapter 7 does have exemptions for certain assets.
Lewisville bankruptcy attorney David Shuster can help you discover which option for debt relief would be most effective for your individual situation.