Filing for bankruptcy can help many debtors halt a foreclosure or other legal action against them.
When faced with overwhelming debt, at some point you may end up defaulting even on your most important debts. Typically the unsecured debts like credit card debts and medical bills fall by the wayside first. In most cases, defaulting on these debts won’t have much consequence beyond ruining your credit and exposing you to the harassing attentions of debt collectors. If the situation is still dire, you may be forced to also default on secured debts like their mortgage or car loan. When this happens, you risk losing important assets that may be essential to your ability to hold a job and provide shelter for your family.
The good news is when you file for bankruptcy, a provision called the automatic stay immediately goes into effect. The automatic stay is basically a cease and desist order for all the entities that want a piece of your assets. It will last as long as your bankruptcy lasts and can give you invaluable breathing room to get your finances back on track.
Here are the 5 most important legal actions that the automatic stay can stall.
Foreclosure: California’s bankruptcy exemptions make it possible to keep your home during the bankruptcy process. Most individuals facing foreclosure can get the best benefit from Chapter 13 bankruptcy.
Lawsuit Judgment: If you have been sued and had a judgment filed against you as a result, you may be facing tens or even hundreds of thousands of dollars in debt. When judgments go unpaid, the other party’s attorney can seek help from the courts in getting you to pay. However, if you are in the midst of a bankruptcy you will be protected from these measures for the time being.
Wage Garnishment: If you are having your wages garnished for the repayment of a debt but not for payment of child support or alimony an automatic stay can halt this practice. You’ll get to keep your whole paycheck, and if you’re able to discharge the debt behind the garnishment (such as a credit card debt that has gone into collections),
Bank Levy: If you owe a bank money, they may place a levy on you and seize and sell your property or take cash from your bank account in order to help cover the debt. An automatic stay can freeze a bank levy. Depending on the nature of the debt and the type of bankruptcy you file, you may still have to repay the bank after bankruptcy.
Repossession: If you default on a car loan, it is fairly common for the bank to repossess your car. When you file for bankruptcy, you can usually keep your car and any repossession efforts will be stayed.
One note: bear in mind that in some cases the lender can petition the court to override the automatic stay. Be sure to ask your bankruptcy attorney about how the automatic stay applies to your unique circumstances before filing for bankruptcy.
