Bankruptcy is not a particularly fast process. Instead, it typically takes months, if not years, for the filer to obtain a discharge. Finances have to undergo scrutiny. In a Chapter 7 case, asset liquidation may be necessary. In a Chapter 13 case, the filer has to complete a repayment plan that lasts anywhere from three to five years.
Technically, the filer is still responsible for their valid outstanding financial obligations during their bankruptcy proceedings. Protection from financial responsibility comes from the discharge granted by the courts, which filers received at the very end of the bankruptcy process.
They could be at risk of foreclosure, vehicle repossession and creditor lawsuits in the meantime. The automatic stay that the courts grant can prevent creditors from pursuing aggressive collection activity while there is a bankruptcy case in progress.
How soon can filers receive protection from an automatic stay?
Most people receive same-day relief when they file
When an individual files a petition for bankruptcy relief with the courts, several things happen immediately. The courts generally share information about the pending filing with the credit bureaus that same day. Most major financial institutions have services that notify them about account holders or debtors initiating bankruptcy proceedings.
Typically, the automatic stay takes effect the same day that an individual files paperwork with the courts. Most of the time, creditors and lenders become aware of the filer’s automatic stay within a day or two. Occasionally, filers may need to notify collection professionals of the pending bankruptcy when they receive a phone call or letter in the mail.
Providing information about the bankruptcy case should be enough to halt all collection efforts. Not only do creditors need to stop calling and sending letters, but they typically also need to dismiss any pending lawsuits. A prompt bankruptcy filing can help people preserve assets that are at risk and prevent the courts from granting a creditor a judgment.
Filing for personal bankruptcy can provide immediate relief from collection activity and may eventually provide relief from overwhelming debt. People struggling to fulfill their financial obligations may want to learn more about the bankruptcy process to protect themselves from aggressive collection efforts and unsustainable debt levels.