If you have overwhelming debt, you may be struggling with impossible monthly bills as well as harassing phone calls from collection agencies.
However, when you file for bankruptcy, the court automatically issues a “stay.” This automatic stay temporarily prevents collectors from contacting you about debts. The automatic stay also temporarily stops certain types of collection actions, giving you the time you need to complete the bankruptcy process and get your finances back on track.
1. Stopping wage garnishment
If you have many types of debt, you may also have multiple garnishments on your take-home pay. However, once you file for bankruptcy, most types of wage garnishment automatically pause until the court lifts the automatic stay.
2. Preventing utility disconnection
When you are already struggling with debt, the last thing you want to worry about is your basic utility needs. An automatic stay can temporarily prevent gas, electric, telephone or water utilities from shutting off your service.
3. Stalling foreclosure or eviction
Automatic stays can often prevent foreclosure or eviction procedures for a short time. However, if you have a mortgage, you will likely need to file for Chapter 13 bankruptcy if you want to try to keep your home. Under Chapter 13, you may be able to restructure your debt so that you have lower monthly payments.
Bankruptcy can be a powerful financial planning tool when you are struggling with certain types of debt. However, it may not be appropriate in every circumstance. Before you file, make sure to explore how your options might impact your current debt as well as your chances of creating a better financial future.