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How does bankruptcy offer protection
You may be considering filing bankruptcy because you need help getting control of your debt. But debt elimination is only one half of the bankruptcy formula. Bankruptcy is also designed to provide extensive protections for you, your property and your future.
In fact, some people refer to the bankruptcy process as “filing for bankruptcy protection.” The protections offered by bankruptcy take many forms.
First and foremost, bankruptcy offers protection in its finality. Unlike credit card settlement companies that try to work out deals and negotiations, bankruptcy is a part of the U.S. legal code. This means that the rulings and results of your bankruptcy are final and protected by law.
So when your debt is eliminated through bankruptcy, you are protected against future claims on that debt. Your past debts are put to rest for good.
Under the broad protection offered by bankruptcy are specific tools designed to provide filers with the safety and security they need to get their debt under control.
The Automatic Stay is a powerful court order that takes effect as soon as anyone files bankruptcy, be it Chapter 7 or Chapter 13.
The Automatic Stay puts an instant freeze on all financial matters regarding the filer. One the stay is put into effect, all claims against your debt and your property must stop. This means:
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Foreclosure and repossession attempts and processes must stop
- Wages may not be garnished
- Creditor collection, including phone calls and repossession threats, must stop
- Lawsuits are put on hold
If you are afraid you will lose your house to creditors, or can’t take another demeaning phone call from a collector, filing bankruptcy can put a stop to all this right away.
So bankruptcy can give you room to breath while you, your bankruptcy lawyer and the courts sort out the best action to take against your debt.
Other protections offered by bankruptcy include:
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Chapter 13 bankruptcy trustee: If you file Chapter 13 bankruptcy, your debts will be combined and ordered. Then, instead of juggling multiple bills, you’ll make one payment to a trustee. This trustee will handle all of your creditors so you won’t have to. You’ll be protected against any claims for these bills or against your property for the duration of your repayment plan, which could be 3-5 years.
- Chapter 7 exemptions: The bankruptcy laws in each state included detailed “exemptions.” The exemptions outline the types and amounts of property that are totally protected from sale or repossession when you file Chapter 7 bankruptcy. For a complete list of the exemptions in your state, speak with a local bankruptcy lawyer.
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