When people file bankruptcy, the first question they often ask is “when will I start to see a benefit from this process?”
It takes a little bit of work to get to the point where you can file bankruptcy. You have to gather all your bills, list your property and account for your income and expenses. After all that work, you want to see results for your hard work and the fee you paid your attorney. No worries – the impact of a bankruptcy is immediate and powerful. One day you are sitting in my office signing all of your paperwork, normally exhausted from the constant calls and mailings from your creditors and then, like magic, the next day, you will notice a significant decrease in the phone calls you receive from your creditors. After about two to three days you will notice that not only have your calls stopped, but the mailings as well. The explanation for why this has happens is really quite simple and can all be explained by understanding the power of the “bankruptcy stay”.
Immediately when you file bankruptcy, your creditors must stop all collection efforts, at least temporarily. This includes lawsuits, foreclosures and repossessions. In fact, the Bankruptcy Code specifically forbids your creditors from performing any collection efforts and an immediate “stay” must go into effect. There are a few exceptions to this rule. For example, if your house has been sold at a foreclosure sale and a certain number of days have passed, it may be simply too late to get back your property or stop the effects of a judgment against you.
It is very important to not wait to see a bankruptcy attorney if you have been informed that you are facing a foreclosure, repossession or lawsuit. You need to move quickly so that the “bankruptcy stay” can stop these activities from having a potentially devastating impact on you and your family. These activities can be stopped, with the exceptions noted above, at least temporarily, and in most cases permanently stopped, as long as you successfully complete your bankruptcy case.
If a creditor still wants to move forward with a repossession, foreclosure or lawsuit after you file bankruptcy they have to ask for permission from the Court via a “Motion for Relief”. It is not usual for a mortgage or a car creditor to ask for Motion for Relief from stay after you file bankruptcy, however it is highly unusual for your credit card or other unsecured creditors to request such relief.
The Motion, which consists of the creditors request for relief from the stay to go forward with collections, is mailed to you and your attorney. If you are surrendering your house or car (which you would have discussed with your attorney – long before you filed bankruptcy), then no further action needs to be taken. However, if you want to keep your house or car, your attorney will walk you through your options and once again you have the option to save your house or car.
It is important if you want to keep your house and car to carry current insurance on your property and to maintain your payments after you file bankruptcy. If you are behind on your car or house payments before you file bankruptcy or if you are behind on your insurance premiums it is important to tell your attorney BEFORE you file. Your attorney can only help you if they know what is happening. Do not be afraid to talk about your current situation.
Note that the bankruptcy stay DOES NOT APPLY to child support or alimony payments. If you file bankruptcy and have to pay alimony or child support you cannot stop your spouse from collecting on past due amounts or receiving future amounts.