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How Bankruptcy Courts Help In Fighting Against Financial Crises

Facing a foreclosure can be the most challenging and confusing situations in an individual’s life. In a situation where you are close to losing all your properties because you don’t have money to pay off your loans, one of the most common solutions can be a bankruptcy filing. Even after being associated with a number of negative aspects, bankruptcy can prove to be one of the most helpful options when you do not know how to deal with severe debt crises.

Before opting for bankruptcy, it is always wise to seek advice from some reputed attorney or debt solution services in order to obtain adequate information regarding your legal rights and alternatives. However, in circumstances where bankruptcy is your last resort, it can be highly comforting to know the various advantages involved in the process, which can provide you assistance and support during the crisis periods.

In a situation when you are already confused and overwhelmed under the outrageous impacts of a debt burden, constant harassments from creditors can be too much to handle. It leads to circumstances where you do not even know whom to turn to for help. Bankruptcy courts can provide you instant relief from these harassments by accepting your bankruptcy petition and declaring you bankrupt, thereby prohibiting lenders from making direct contacts with you. The moment you are declared bankrupt, the creditors are legally bound to stop harassing you for money and communicate with the court for any of their concerns. This is a great relief during severe financial difficulties.

Another noteworthy advantage of bankruptcy filing is that it uses the power of the automatic stay to relieve you of any lawsuit that might have been filed against you by the creditors. An automatic stay is an order issued by a bankruptcy court that becomes active the moment you file for bankruptcy, thereby helping you in protecting your properties from being sold for a definite period of time.

The extent of help you might get against foreclosure depends on the type of bankruptcy you opt for. For example, chapter 13, bankruptcy provides a complete relief from the stress and hassles of foreclosure and also offers you easy repayment plans to enable you to pay back the debt amount as per your affordability and conveniences over a definite time period. Within this period of time your creditors are legally obliged not to make contact with you as long as you are consistent in making payments.

On the other hand, assistance provided by chapter 7 bankruptcy has certain limitations to it. It cannot provide complete relief from the hassles of foreclosure since creditors can resume with the lawsuit once the bankruptcy procedures come to an end. It does however help you with some valuable time to arrange for money in order to pay off the debt amount and protect your properties from being sold. Again, it does help you with several tax benefits.

However, in certain situations, bankruptcy courts fail to help debtors against foreclosure.

In case, creditors file a petition with the court to remove the automatic stay and the petition is accepted by the court, the normal duration of the automatic stay gets reduced, and the lenders are once again allowed to sell off the mortgaged properties.

Automatic stay becomes invalid in case the bankruptcy filing is done after the foreclosure notice has already been sent to the owner of the mortgaged property.