Many in Nashville often ask "when does filing for bankruptcy become your best option in dealing with your debt?" Unfortunately, there is no easy answer to that question. There may be cases where simply "tightening your belt" for six months to a year would allow to get your debts back under control. However, there may come a point where multiple creditors are looking to initiate collection activities against you, which could serve to further compound your struggles. In these situations, the automatic stay afforded through a Chapter 13 bankruptcy could prove to be beneficial.
What is an automatic stay? Simply put, an automatic stay halts collection activities in many (but not all) situations. Upon you filing for a Chapter 13 bankruptcy, the bankruptcy court clerk or trustee assigned to your case will notify all of the creditors (whose information you provide him or her with) of your case. This calls for the cessation of all activity being taken against you, including:
- Wage garnishments
- Collection calls
Per the website for the United States Courts, and automatic stay is often extremely helpful in two particular areas: stopping foreclosure and protecting joint account holders. Your bankruptcy case will halt any impending foreclosure proceedings and offer you the time needed to submit your outstanding back payments. Keep in mind, however, that you must continue to make your regular monthly mortgage payment during your case. A bankruptcy stay also prohibits creditors from going after parties that you may hold debts with (even if they themselves are not seeking bankruptcy protection).
As was mentioned earlier, there are certain collection activities that are not halted by a bankruptcy case. These include any expenses you may owe due to criminal activity, or child or spousal support arrears.