When asking a bankruptcy attorney what's the number one reason why people file for bankruptcy, the answer would be to stop the creditor harassment. In recent years, creditors have become very aggressive in their tactics to collect on debts. With the Internet they have many sources of information to find debtors and go after them. When a debtor gets bombarded by calls and letters everywhere they go, they become overwhelmed and look for a way to make it stop. That's where filing bankruptcy really shines. Immediately following a bankruptcy filing, the automatic state kicks in.
The automatic stay is the court order that gives the power to the debtor that is filing bankruptcy. The automatic stay puts a hedge of protection around the debtor while they are filing bankruptcy. It keeps creditors from contacting the debtor directly by phone or mail and stops them from pursuing any kind of collection activities, including lawsuits. The automatic stay is so powerful it will even stop foreclosure. Generally speaking, if the debtor is filing Chapter 7 bankruptcy, it will only stop foreclosure temporarily, but will buy the debtor some time to figure something out. In a Chapter 13 bankruptcy the automatic stay will last through the entire 3 to 5 year payment time frame, unless the debtor fails to complete the Chapter 13 plan. Usually, the automatic stay in Chapter 13 bankruptcy is used to protect real property, and allows the debtor to catch up on back payments.
The only way that creditors can pursue the debtors that are filing for bankruptcy is to file a motion with the bankruptcy court for relief from the automatic stay. In essence, they ask the court permission to allow them to collect outside the bankruptcy process. Most of the time, creditors use this relief to continue a foreclosure or collect other secured assets like a vehicle. Other times the relief from stay is used to continue another legal process, such as divorce. Many times this will be encouraged because the bankruptcy attorney will feel that another court is better equipped to handle the ongoing legal problems of the client.
In a Chapter 7 bankruptcy a motion for relief from stay usually involves houses and cars. In most cases the creditor is trying to enforce their rights against the assets when a debtor is surrendering the asset.
When creditors feel they aren't being paid enough, while the debtor is in the process of filing Chapter 13 bankruptcy, creditors will sometimes file a relief from the automatic stay before the Chapter 13 plan is confirmed. The only other time creditors will file this motion in the Chapter 13 bankruptcy is when the debtor starts missing payments. If the debtor feels they have a problem keeping up with the payment plan they should contact their bankruptcy attorney immediately to negotiate something with the creditors. Responding quickly can many times stop the future legal efforts by the creditors.
In today's economic times bankruptcy is going to become a common topic. It's nothing to be ashamed of and was created with the intent of helping good people get a second chance with their finances. Contact a bankruptcy attorney and use the power of the automatic stay to get the creditors off your back.
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