Some people take their time and plan for a bankruptcy filing. They have the luxury of consulting with an attorney and moving slowly toward their goal of filing. Other people rely on bankruptcy for support when they experience sudden and pressing financial hardship. They don’t plan to file for bankruptcy until something goes drastically wrong.
They may realize that they are at risk of a lender repossessing their vehicle or foreclosing on their home. Perhaps a creditor has filed a lawsuit to garnish their wages. People facing high-pressure collection tactics or litigation may start considering bankruptcy because they believe they are out of other options. In such cases, the people preparing to file often need immediate financial relief. How quickly can bankruptcy offer relief and protection to those facing aggressive creditor action?
Bankruptcy offers same-day protection
Personal bankruptcy can protect people from creditor lawsuits and harassment as soon as they file. It can take months, if not years, to receive a discharge. Filers typically need support as soon as possible to avoid additional financial challenges before the courts grant their discharge.
When an individual who has fallen behind on their financial obligations or faces overwhelming debt files for bankruptcy by submitting paperwork to the courts, they receive an automatic stay. An automatic stay takes effect immediately and protects the filer from additional collection efforts.
Typically, the courts send notice of the pending bankruptcy to the credit bureaus. Most creditors and lenders find out about the bankruptcy quickly. They may then cease attempting to communicate with the filer and might even dismiss pending lawsuits. If any collection activity persists, filers usually only need to notify creditors of the pending bankruptcy to convince them to stop.
The automatic stay remains in effect until the end of the bankruptcy. If the courts dismiss the case, that also terminates the protection of the automatic stay. Given that the completion of bankruptcy can sometimes take several years depending on the type of bankruptcy filed, having access to immediate protection is crucial for those experiencing pressing financial hardship.
Making use of the automatic stay and other basic bankruptcy protections can help people experiencing financial challenges avoid the most severe potential consequences.