Bankruptcy could stop your creditors from making collection calls or repossessing your property. That could include banks that would want to take back your home. It could even prevent a sale of your property at foreclosure. However, there are some exceptions.
These exceptions are designed to protect your creditors, and they are not clearly itemized in Title 11 of the United States bankruptcy code. However, there are some established limits both in the code and in case law.
Title 11, the section on federal law that governs bankruptcy, list three examples of enforcement of creditor protection laws:
- You paying cash over time or in a lump sum to satisfy the loss of value represented by your bankruptcy
- An additional lien on your property
- Another type of relief to equal the amount you owe
Since this is one of the major protections your creditors have, you could probably expect litigation based on these laws. Most creditors would attempt to secure some sort of payment for their losses by filing suits under the adequate protection sections.
However, the automatic stay would still safeguard you against most action, at least until the secondary suits resolved. That means that, during your bankruptcy, you could have some time to review your finances, assess your strategy and potentially work out repayment plans with those who hold your debts.
It is important to understand that, while bankruptcy is a relatively permanent solution, the automatic stay only allows the court the time to decide on how you should dispose of your debts. While your initial reaction may be relief when your home or your other property is temporarily saved, it is important to continue working today more permanent solution that could allow you to break free of your debt and put your financial life back together. Please do not regard any of the information in this article as legal advice for any specific situation.