Thomas K. McKnight - Bankruptcy Protection Lawyer
What does bankruptcy protection actually mean? What does bankruptcy protection really protect for the common consumer?
When you read a press release regarding a business 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 concerning debt and financial issues. 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 made before 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 imply for you? Essentially, a bankruptcy filing applies an automatic stay that will not allow your creditors to proceed with a judgment to collect their debts from your accounts or income. When you are under bankruptcy protection, all of your assets are protected until the bankruptcy is over. It is a common misunderstanding 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 lawsuits and judgements. A court of law does not assess your circumstance before a judgment is determined. You can stop the whole process by letting the courts know that you do not have the resources to pay off 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 can not pay the debts you currently owe.