People file for personal bankruptcy for many different reasons. Some people plan for bankruptcy, while others have to file with little advance notice. Those worried about creditor lawsuits, vehicle repossession or foreclosure may file for bankruptcy within days of learning about impending legal challenges.
They do so to obtain the critical legal support of an automatic stay. Individuals filing for Chapter 7 bankruptcy can receive same-day relief from aggressive collection efforts.
What is the automatic stay?
Chapter 7 bankruptcy is the fastest form of bankruptcy available to individuals. However, it can take several months for the courts to review the case and approve the filer for discharge.
Their financial circumstances could worsen substantially during that time without protection. Bankruptcy filers typically receive same-day relief in the form of an automatic stay. All collection activity has to end until the courts approve the bankruptcy case or dismiss the filing.
Some creditors can petition the courts to lift the automatic stay, but most creditors accept the mandatory cessation of collection efforts. Most of the time, people can avoid aggressive collection efforts, including the seizure of collateral property and a lawsuit brought by a creditor in civil court. Many people choose when to file for bankruptcy based on the need for protection from imminent collection efforts.
Taking action before collection efforts worsen financial circumstances can help people optimize the benefits they derive from filing for personal bankruptcy. Those with proper support can then choose the best time to file and can depend on the guidance they receive to make the process manageable. A well-timed Chapter 7 bankruptcy filing can halt collection efforts and help a person overcome their recent financial challenges.