People facing financial hardship may be at risk of many unfortunate outcomes. Some individuals deal with mounting daily stress as creditors call and send ominous letters frequently. Others may anxiously worry about a lender repossessing a financed vehicle or attempting to foreclose on a house.
Creditors can even file lawsuits against people who have fallen behind on their financial obligations. They can place a lien against property or try to garnish the debtor’s wages. Those collection efforts can significantly worsen the financial circumstances of people already struggling to balance their budgets.
Those in dire financial straits sometimes choose to file for personal bankruptcy as a means of responding to major financial challenges. People with limited personal property and an average or lower income may qualify for Chapter 7 bankruptcy, which is the fastest form of bankruptcy available. How quickly can a bankruptcy filing provide relief from collection efforts?
Some relief is instantaneous
Bankruptcy requires court review to protect individual creditors and financial businesses from fraud. The courts must evaluate the filer’s recent financial activity, including whether they intentionally spent money without a good faith intention to repay it. Waiting for a review means that it can take months to complete even a Chapter 7 filing. Filers could experience worsening financial hardship because of that delay while waiting for their day in court.
When people file for bankruptcy, the courts issue an automatic stay, effectively halting all collection efforts. An automatic stay takes effect the same day that the filer submits paperwork to the courts. The automatic stay extended by the courts prevents creditors from repossessing vehicles or moving forward with foreclosure.
Creditors may need to dismiss pending lawsuits and cease calling people in an attempt to collect on debts. The automatic stay provides relief right away and usually remains in effect until the filer completes the process or the courts dismiss the case.
Discharge takes a while to achieve
Those pursuing personal bankruptcy typically aspire to discharge their eligible unsecured debts. Doing so typically requires several months in a Chapter 7 bankruptcy case.
Once a trustee has reviewed their initial paperwork and a judge validates that they qualify at a hearing, the courts can discharge eligible debts. The filer then has no legal obligation to pay those debts. Creditors can no longer attempt to collect on them either.
Those facing aggressive collection efforts or who are concerned about a pending lawsuit may want to learn more about filing for Chapter 7 bankruptcy. Initiating personal bankruptcy at the right time may help people protect their assets and end the stress of daily creditor calls.