One of the most common bankruptcy myths and fears about filing for bankruptcy relief is losing property, especially a home. For many people, their home is their most valuable asset. The thought of losing your house in bankruptcy is terrifying. However, what are you supposed to do if you cannot afford to pay your bills and creditors are threatening to file collection lawsuits?
Filing a Bankruptcy Case Stops Collection Efforts
When you file a bankruptcy petition, the automatic stay provisions of the Bankruptcy Code prevent creditors from taking any further action to collect a debt without bankruptcy court approval. In other words, your creditors cannot repossess or foreclose property without court approval. Creditors cannot file collection lawsuits or continue collections lawsuits after you file a Chapter 7 or Chapter 13 bankruptcy petition. They cannot continue to garnish your wages or harass you for payments once you are protected by the automatic stay.
The automatic stay is designed to give a debtor time to seek bankruptcy relief without fear creditors will continue debt collection efforts. For Chapter 7 debtors, the automatic stay prevents creditors from seizing assets until the court reviews the debtor's financial situation to determine if any assets can be liquidated to pay unsecured creditors. A Chapter 7 filing will temporarily stop a foreclosure of your home in Connecticut.
How Does a Chapter 7 Case Impact My House?
Filing a Chapter 7 bankruptcy case stops a foreclosure action. However, the mortgage company can file a motion with the court for permission to continue a foreclosure action if you are behind on your mortgage payments. The Chapter 7 case gives you just a few months at best to catch up the mortgage payments to prevent the home from being sold at a foreclosure sale. For debtors who owe more on their mortgage than the home is worth, a Chapter 7 bankruptcy case is a way to get rid of the home without paying any money to the mortgage company for a deficiency judgment.
If you are current with your mortgage payments, a Chapter 7 case can get rid of unsecured debts so that creditors do not obtain personal judgments that could attach to your house. In most cases, debtors who are current with their mortgage payments keep their homes when filing a Chapter 7 case, if that is their choice. Bankruptcy exemptions typically protect the equity in a house from the court and your creditors.
The Hartford, Connecticut bankruptcy lawyer at The Law Offices of James F. Aspell, P.C. carefully review all assets, including your house, before you file a Chapter 7 case to determine if any assets may be at risk in a Chapter 7 case. We will work with you and provide you with the correct information you need to make an informed decision on whether or not to file for bankruptcy.
Contact a Connecticut Bankruptcy Attorney for More Information
If you are struggling with debts, you can get a fresh start by filing a Chapter 7 bankruptcy case. Ignoring your debts only makes matters worse. Eliminating your debts in a Chapter 7 bankruptcy gives you the chance to recover and rebuild after a financial crisis without creditors harassing you for payments you cannot afford or filing debt collection lawsuits for unpaid debts.
Contact us at 860-523-8783 to schedule your free consultation with an affordable Hartford bankruptcy attorney.