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Filing for Bankruptcy – Types of Protection
Federal bankruptcy law allows individuals and businesses protection from their creditors, and relief from debt. The type of protection that is extended to an individual or a business will depend on the type of bankruptcy that is filed. When filing for bankruptcy, the two types of bankruptcies for individuals are known as Chapter 13 Bankruptcy and Chapter 7 Bankruptcy. While they offer similar types of protection, each bankruptcy is made unique by the types of people who qualify for them, the types of problems they help solve and what they each require for successful competition. Universally, both Chapter 13 Bankruptcy and Chapter 7 Bankruptcy help to abate creditor harassment and prevent direct collection efforts by creditors.
Filing for Bankruptcy – The Automatic Stay
Both Chapter 13 Bankruptcy and Chapter 7 Bankruptcy stop creditor harassment and prevent direct collection efforts by creditors once the process of filing for bankruptcy has begun. Upon the filing for bankruptcy a legal fiction goes into affect called the “automatic stay.” The automatic stay is created by law and provides that creditors are “stayed” or prevented from collecting against the debtor. Creditors are prevented from undertaking all collection activities including calling you directly, sending you letters, filing a lawsuit, freezing your bank account, starting or continuing a garnishment and any other activity that is considered trying to collect on a debt. Even creditors who hold debts that bankruptcy cannot discharge, such as government fines, most recent taxes, tickets, student loans, debts obtained by fraud and past due child support must stop their collection efforts during the time your bankruptcy is pending.
Filing for Bankruptcy – Role of the Bankruptcy Court
The bankruptcy court has authority to sanction a creditor who oversteps its bounds and tries to collect from you without court permission after a bankruptcy case has been filed. For instance, a creditor that started a wage garnishment before your case was filed and then refuses to stop the garnishment after you have filed can be sanctioned for punitive damages. If the creditor fails to voluntary obey the automatic stay, you have the right to file a request with the bankruptcy court to force that creditor to stop. If you are successful, you can get back the monies that were taken from you, and you can punish that creditor with sanctions. In other words, you get your money back and the creditor gets fined for its misdeeds. When filing for bankruptcy, it does not matter which type of bankruptcy you file, whether you are eliminating your debt with a Chapter 7 Bankruptcy, or paying some of it back with a Chapter 13 Bankruptcy, creditors can be punished for collecting directly against you!
Filing for Bankruptcy – The Permanent Automatic Stay
Upon completion of filing for bankruptcy, either Chapter 7 or Chapter 13, the automatic stay becomes permanent as to those debts that are dischargeable, such as credit cards, medical bills, personal loans, utilities and payday loans. In a Chapter 7 Bankruptcy, the debt is wiped out completely, and in Chapter 13 Bankruptcy any unpaid portion of your debt is eliminated. A creditor can never collect on that debt again! Ever!
Contact a Legal Helper’s attorney to help find out more about filing for bankruptcy and the protections of Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.
