Your Legal Rights Under the U.S. Bankruptcy Code
Many people are mistakenly led to believe that the Bankruptcy Code is harsh and that filing bankruptcy can’t help them get out of debt. This is NOT true.
Of course, many of the people touting this nonsense are creditors and credit counselors. It’s in their best interest to scare you away from possibly discharging your debt through bankruptcy.
The Power of the U.S. Bankruptcy Code
The truth is that bankruptcy has helped millions of Americans get out of debt.
By filing bankruptcy, debtors are immediately given breathing room through the automatic stay, which is a court order issued by the bankruptcy court that stops collection efforts.
The automatic stay is in effect until the bankruptcy is discharged or is otherwise lifted by the court. This is true for most Chapter 13 and Chapter 7 bankruptcy cases.
What's the Importance of the Automatic Stay?
The automatic stay can allow some debtors more time to save their homes from foreclosure. It can also stop repossession of other property.
The automatic stay can also ban creditors from contacting the debtor or pursing any legal action against them, including many types of lawsuits and wage garnishments.
You can now understand why creditors try to steer you as far away from bankruptcy lawyers as possible.
What they don't want to tell you is that filing bankruptcy may actually help you.
If you're drowning in debt, your phone is likely ringing off the hook. Debt collectors can be relentless and may not stop harassing you at home and work unless they are legally forced to stop.
You may send a registered letter demanding that the calls stop, but that may provoke further legal action to collect the debt.
But bankruptcy is designed to stop bill collectors cold. They legally CANNOT contact you.
They know this, they fear this and they’ll do anything to keep you in the dark about the benefits of filing bankruptcy.
Chapter 7 Bankruptcy Exists to Eliminate Debt
If you’re sinking in debt, credit counseling and debt settlement programs usually just allow you to tread water a bit longer.
Typically, debtors in credit counseling or debt settlement programs still make monthly payments that are difficult to handle and often still pay high rates of interest on their debts.
If you’ve lost income or have a lot of debt, as many Americans do, you may not be able to make payments at all.
You don’t have to be employed to file Chapter 7 bankruptcy, but you do have to pass the Chapter 7 means test. (A lawyer can help you determine if you qualify to file Chapter 7.)
Under Chapter 7 bankruptcy, most unsecured debts (medical bills, credit card debt, payday loans, utility bills, etc.) can be completely discharged.
For those still trying to find a job during this economic recession, that can be powerful.
The Chapter 13 Repayment Plan: The Foreclosure Fighter
For homeowners facing foreclosure, filing Chapter 13 bankruptcy can save many of their homes.
Under Chapter 13 bankruptcy, debts are reorganized with interest and late fees reduced or eliminated, allowing debtors breathing room through one manageable monthly payment.
Want to learn more about how to file bankruptcy?
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