Once you fall behind on your credit card bills, mortgage, car payments or utilities, you will start getting letters from your lenders. If you do not respond to those letters with payment in full, your creditors will start to take more aggressive actions. Typically this would involve either turning the account over to an internal collections department or, worse, selling your debt to a third party collection agency.
Once an account goes into collections, it can become a significant source of stress for the borrower. Collection agents have to adhere to laws about their behaviors, but they will push the issue as far as they can without incurring legal risk. They may call you at inconvenient times or places, such as your place of work.
Thankfully, if you know that your debt has gotten to a point where you are not in control anymore, you still have options that can put an end to creditor harassment.
Filing for bankruptcy provides you with an automatic stay
There are many benefits to filing bankruptcy, not the least of which is the fact that the courts will possibly forgive some of your unsecured debt. Another benefit that people often don’t think about until they experience it is the automatic stay.
An automatic stay is an order by the court that prevents any ongoing collection activity until the resolution of your bankruptcy filing. In other words, as soon as you file for bankruptcy, creditors and collection agencies have to stop calling you. If they filed a lawsuit, the lawsuit will not move forward unless your bankruptcy gets dismissed instead of approved.
In fact, that automatic stay can even help you negotiate with your lender about the repossession of a car or the potential foreclosure of your home. You may have to answer the phone for some of the collection calls to advise employees that you have filed bankruptcy. Once they have the date on which you filed and the district court where you filed, that should be all the information they need to put you on a “do not call” list.
Bankruptcy offers a fresh start and less stress in your life
If you have fallen behind on your bills, you probably feel an intense amount of stress on any given day. You may wonder where your next payments will come from or how your household will survive. When you can only make minimum payments on accounts, you incur huge interest costs and other fees that can drastically increase the amount of money you owe.
Bankruptcy discharges your unsecured debt, such as credit card debts and medical debt, which allows you to start over without that debt. Your budget may be much more workable when you don’t have to make payments on credit cards every month.
For those who feel like they are boxed in by debt and beleaguered by creditors, bankruptcy may be the best option for starting over and taking control over both their finances and their life.