Filing for bankruptcy has several immediate effects that can provide tremendous relief to people and businesses struggling with bills and debt collectors. However, while these are an important part of bankruptcy, the effects are often not permanent, and every bankruptcy petitioner must always keep the end result in mind.
The most immediate result of filing for bankruptcy is the automatic stay. This is an order issued by the bankruptcy court that stops collection activities, usually for the entire duration of the bankruptcy. While there are some exceptions, the automatic stay has a very broad effect:
- Debt collectors must stop calling.
- Foreclosure proceedings usually stop.
- Eviction proceedings may be prevented or stopped under some circumstances.
- Creditors’ lawsuits are prevented or stopped.
- Wage garnishment based on civil judgments stops.
There are, however, several important points about the automatic stay. First, creditors can still ask the court to lift the stay. Second and more important, just because efforts to collect a particular debt are stayed does not necessarily mean that debt is dischargeable. For instance, filing for Chapter 7 bankruptcy stays foreclosure proceedings, but Chapter 7 usually does not discharge secured mortgage debt. This means that if keeping your home is your objective, Chapter 7 may only be a temporary solution.
All these rules and exceptions can be overwhelming. That is why it is important to talk your case over with an experienced bankruptcy attorney before committing to a course of action. Whatever your situation and goals may be, a bankruptcy advocate can guide you to the solution that works best for you, your family or your business.