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How does bankruptcy 'protect' me as a filer?

Anyone in Arkansas who regularly reads our blog knows that when talking about services related to providing debt relief we often emphasize the protection that filing for bankruptcy can provide. Given the common misconception that bankruptcy is a sign of individual failure and the reality that bankruptcy can present challenges, it's fair to ask what we mean by protection. The easiest way to respond is by talking about personal assets.

Those who don't have any direct experience with bankruptcy proceedings often assume that it's a given that they will lose everything they have worked so hard to acquire. They fear they will see their home, any land they own, their vehicles – even perhaps the clothes on their backs – sold off to satisfy unrelenting creditor demands. That fear is often misplaced.

When an individual uses the legal remedy of filing for bankruptcy, he or she enjoys the grant of an "automatic stay" on actions by debt collectors. If a creditor has filed a lawsuit, the stay brings action to a halt. The collector could be a private entity or the government, it doesn't matter; the stay applies.

What the stay can help with may include:

  • Preventing utilities from being cut off
  • Putting home foreclosure proceedings on hold
  • Halting eviction efforts by a landlord
  • Blocking efforts by government agencies to pursue recovery of overpaid public benefits
  • Putting a block on creditor efforts to garnish wages

The automatic stay can't be invoked in every situation and knowing when it could apply or not is something that can be hard to nail down without help. Once in place, it may also need to be defended against creditor efforts to have the stay lifted by the court. These are reasons why working with an experienced attorney is always recommended.

Source: FindLaw, "The Automatic Stay: Stopping Creditors with Bankruptcy," accessed July 28, 2016

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