Creditors can resort to several methods to collect on past due debts. If you fall behind on payments, they may seek a judgment to garnish your wages. Your mortgage lender may also foreclose on your home. These are only two examples of what could happen once you fall far behind enough on your debt obligations. If you have an excessive number of other debts, it can make it difficult or impossible to become current on payments. Bankruptcy is an option that you could consider to temporarily halt collection attempts.
A major benefit of filing for bankruptcy is that it issues an automatic stay. This is the mechanism that stops most creditors from taking your assets or pay during your bankruptcy case. Depending on the situation, the automatic stay might stop:
- Wage garnishments: An automatic stay can stop wage garnishments for certain debts, such as for past-due credit card debt or medical bills. Although student loans are extremely difficult to discharge in bankruptcy, the automatic stay may stop a wage garnishment for defaulted student loans. There are ways to exit default on federal loans, which could halt the garnishment by the time your case concludes.
- Foreclosure: The automatic stay could temporarily halt your mortgage lender from foreclosing. If you file for Chapter 13 bankruptcy, even at the last hour, you could possibly save your home. Delinquent mortgage payments could be combined with other debts in a three to five-year repayment plan. However, you must have an adequate source of income for this option.
- Collection phone calls and letters: Creditors cannot attempt to collect debts through phone calls or letters during your bankruptcy case.
- Car repossession: Your lender cannot repossess your car after you have filed for bankruptcy. Chapter 13 bankruptcy could even provide you with the opportunity to keep your vehicle. This option is especially useful if your vehicle is used to get to work.
Does the Automatic Stay Stop All Collection Attempts?
There are certain collection actions the automatic stay cannot stop. You should discuss your situation with a bankruptcy attorney to learn more about your options under the automatic stay. The New Jersey bankruptcy attorneys at Garland & Mason, L.L.C could discuss how bankruptcy could provide you with an effective path for debt relief while protecting your assets from creditors.