Have you heard the phrase “bankruptcy protection” and wondered how a bankruptcy could protect you? Most potential bankruptcy clients usually have a sense of what filing a bankruptcy means, but are often unsure of how the process actually works.
One common question that potential clients have is "How does filing a bankruptcy protect me?" The short answer is that through something called the Automatic Stay, most creditors are prevented from continuing the collection activity during bankruptcy, and many debts may even be dismissed.
Though the bankruptcy discharge process may vary in length (from 90 days to 5 years—depending on the type of bankruptcy filed), the protection begins immediately upon filing. When a bankruptcy petition is filed, a feature of the bankruptcy called the "automatic stay" is activated.
The Automatic Stay in Minnesota
The automatic stay is triggered by Section 362 of the Bankruptcy Code and prevents most creditors from continuing the collection activity during the pendency of the bankruptcy for most matters (it does not halt some family court matters, criminal law matters, etc.). Phone calls, collection letters, and lawsuits for breach of contract in state court are all stopped dead in their tracks and either put on hold or completely dismissed upon the filing of your bankruptcy. In addition, if your wages are being garnished, or if your bank account has been levied, those actions will stop as well.
The automatic stay is important because the bankruptcy discharge does not occur in most cases until approximately ninety days from the filing date (in some cases, the discharge may take longer—chapter 13s for instance). Without the automatic stay, the creditors would still be able to continue their collection and recovery efforts while the bankruptcy was pending and you were awaiting your discharge.
Some Automatic Stay Protections from Disclosure in MN
The automatic stay can also protect you, to a certain extent, from a foreclosure action. The stay can either allow you time to make payments to catch up on your mortgage in a chapter 13 bankruptcy, or provide you time to apply for a loan modification, or even sell the house before the sheriff sale, if catching up is not an option.
However, the most important protection that the bankruptcy affords you is the bankruptcy discharge referenced above. The discharge eliminates your personal liability to pay the debt included in the bankruptcy. This means that the creditor cannot force you repay the debt through phone calls, collection letters, or lawsuits. In addition, any negative reporting to the credit bureaus also stops. The bankruptcy discharge is one of the single most powerful tools that the average consumer can access.
CALL NOW FOR A FREE STRATEGY SESSION FROM A MN BANKRUPTCY LAWYER AT KAIN & SCOTT
If you are the target of debt collectors and are under the risk or garnishment or foreclosure and need a solution, please do not hesitate to reach out to Minnesota’s nicest bankruptcy law firm at www.kainscott.com for a free consultation to find out how we can help. We look forward to hearing from you and helping you put a stop to the collections and get your life back!
