What does Bankruptcy Protection really mean? What does bankruptcy protection actually protect for the average consumer?
When you read a press release about a company or individual filing for bankruptcy, it is common to hear the phrase “…has declared bankruptcy and is reorganizing under bankruptcy protection” or “…has filed for Chapter 7 bankruptcy protection”. The term Bankruptcy Protection is used because a bankruptcy filing in a court of law stops all collections activity and legal proceedings regarding debt and financial matters. All bankruptcy filings including Chapter 7 and Chapter 13 will place an Automatic Stay on the bankruptcy estate.
The automatic stay stops the commencement, enforcement or appeal of actions and judgments, judicial or administrative, against a debtor for the collection of a claim created prior to the filing of the bankruptcy petition. The automatic stay also prohibits collection actions and proceedings directed toward property of the bankruptcy estate. What does this mean for you? Basically, an bankruptcy filing applies an automatic stay that will not allow your creditors to move forward with a judgement to collect their debts from your accounts or wages. When you are under bankruptcy protection, all of your assets are protected until the bankruptcy is over. It is a common misconception that if you file for bankruptcy, you will lose everything you own. It is more likely that your assets will be protected under exemptions in the bankruptcy code that allow you to keep things you need to live. Without bankruptcy protection, your assets may be in danger of being lost to your creditors through law suits and judgements. A court of law does not inspect your situation before a judgement is decided. You can stop the whole process by letting the courts know that you don’t have the resources to pay all your debts. Filing a bankruptcy is the best way to protect your assets and let the courts know that you need to protect the things you own and cannot pay the debts you currently owe.
If you would like to learn more about how Bankruptcy Protection can help you, contact our Orange County bankruptcy attorneys or Riverside bankruptcy attorneys at (855) 257-7671. We look forward to hearing from you.