When people fail to pay the payments on their credit cards, auto loans, mortgages, medical debt, cellphone bills, and utilities, etc., the creditors can take them to court in order to recover the money owed. Suppose you stopped paying one of your bills – in that case the creditor could take you to court and obtain a judgement against you. In that case, the creditor may be able to place liens against your assets, such as your home, and garnish your wages directly from your employer.
Let’s say you were unemployed for nine months, or you couldn’t work because you had to care full-time for a loved one who was in an accident. During that time, you had to rely on credit cards and you couldn’t pay your mortgage. You ultimately went into debt about $40,000, if not more. Now, you’re working again, but at a fraction of what you were earning before and you cannot afford to repay your debts. Should you file bankruptcy?
Taking Advantage of the Automatic Stay
If you were to file bankruptcy, something called the Automatic Stay would take effect the moment you filed your papers with the bankruptcy court. What the Automatic Stay does is place an immediate stop on all collection activities, including lawsuits filed by creditors. If a creditor is threatening to sue you, filing bankruptcy may help stop the creditor from filing the lawsuit and it may allow you to discharge or “wipe out” the underlying debt, especially if it’s unsecured.
What About Foreclosures & Repossessions?
If you have secured loans that are in default; for example, an auto loan or a mortgage, those lenders would be able to repossess the vehicle or foreclose on the property. Generally, debtors aren’t able to eliminate a secured debt by filing bankruptcy. However, if you file bankruptcy, the automatic stay may delay the repossession or foreclosure, buying you some time. If you file a Chapter 13, it may prevent you from losing your home to foreclosure. If you’re interested in saving a home, we can help you determine if Chapter 13 is an option.
If you are facing a creditor lawsuit, we urge you to contact our Orange County bankruptcy firm to schedule a free consultation. We gladly service all of OC as well as Rancho Cucamonga – call 24/7 to make an appointment!