Repairing Your Financial Situation

Posted on: 22 January 2016

It is an unfortunate fact that your creditors have the ability to take aggressive actions against you if you fall behind on your payments. This can result in the loss of your home or any other assets that you used to secure the loan, and it can even result in wage garnishments or lawsuits. Bankruptcy protection can be an excellent option for those that are facing these actions. However, if you have never considered filing for this type of protection, understanding the following couple of questions and their answers should help you to better appreciate the viability of this option.

Can Creditors Continue Collection Actions During The Bankruptcy Process?

 Unfortunately, the process of filing for bankruptcy protection can be rather lengthy. This may cause you to be concerned about the ability of creditors to continue action against you until the process is complete. Luckily, your attorney can file a motion for the court to issue an injunction against your creditors. This will prevent them from being able to continue collections until the bankruptcy process is complete. If you are contacted by a creditor during this process, do not answer any questions and refer them to your attorney.

Will You Lose All Of Your Possessions?

There is a common assumption that bankruptcy will involve all of your possessions being sold to pay off your debts. Fortunately, bankruptcy may not always involve this outcome. This is known as a Chapter 7 bankruptcy, and it is used in situations where you have little or no ability to repay the debts. As a result, liquidation may be the only way to generate the money to settle the debts.  

In contrast, a Chapter 13 filing is designed to simply reorganize the debts so that they can be easier for you to pay. This can include forgiving some of your debts as well as requiring creditors to accept reduced amounts and longer repayment periods.

Choosing to file for bankruptcy protection can be a major decision for you to make, but if you are facing severe financial hardships due to debts, it may be the only way to get a fresh start. Knowing that the court can stop collection actions against you during the bankruptcy proceedings as well understanding that you may not need to have your assets liquidated to enjoy this protection will help you to make an informed choice about whether you should start the process of obtaining this type of protection. For more information, talk with a bankruptcy attorney like Arthur M Richard.