Regardless of what type of personal bankruptcy the filing party selects, the automatic stay is an important part of the bankruptcy process for them to understand. Both Chapter 7 and Chapter 13 personal bankruptcy protections trigger an automatic stay of collection actions which can be helpful to struggling consumers.
The goal of personal bankruptcy is to provide debt relief and a fresh financial start to struggling borrowers and consumers. There are different types of personal bankruptcy including Chapter 7 bankruptcy, which is sometimes referred to as a liquidation bankruptcy, and Chapter 13 bankruptcy, which is sometimes referred to as a reorganization bankruptcy. Each provides options for struggling borrowers and consumers in different situations and circumstances.
Once the filing party has filed for either type of personal bankruptcy protection, an automatic stay goes into effect. The automatic stay is in place for as long as the bankruptcy process progresses. It can provide immediate relief to struggling consumers and borrowers. It prevents any creditor collection actions during the bankruptcy process which provides a good measure of protection for individuals who are behind on their bills and may be receiving creditor calls or facing the threat of collections actions. It can also sometimes help in circumstances when a family home is being threatened by foreclosure.
Personal bankruptcy options stand as an important protection for those facing the daily struggle of overwhelming debt. As a result, parties considering filing for bankruptcy should consider the different options available to them, the benefits of each and which option is best for them.