A common reason that individuals file for Chapter 13 bankruptcy is to stop a foreclosure action against their home. A foreclosure can be temporarily stopped with a Chapter 7 bankruptcy, but in a Chapter 13 the foreclosure may be permanently stopped (with a few exceptions). The exception is that a Chapter 13 will not stop a foreclosure if you have filed for bankruptcy in the prior two years and the court removed the automatic stay in that proceeding as well. This prevents people from filing multiple bankruptcies for the sake of delaying or preventing foreclosure.
The repossession of a vehicle is similar to home foreclosure with the exception that there isn’t usually an advance notice of repossession. Filing for bankruptcy prior to the repossession ensures that the automatic stay will prevent that action up until the judge confirms your repayment plan or dismisses your bankruptcy case. Even if your vehicle has already been repossessed, you will be able to get it back if the bankruptcy judge approves your repayment plan.
Credit Cards, Health Bills, and Attorney Expenses
Creditors or collection agencies trying to collect on any of these or related expenses must stop all collection actions upon the filing of your bankruptcy. They will not be able to:
- Pursue legal action against you
- Obtain liens for your property
- Report your outstanding debts to the credit reporting agencies
- Take away your property or income.
Some tax collection actions are not prevented by the automatic stay, however, filing for bankruptcy does prevent the IRS from garnishing your wages and seizing your property.
You will be able to continue receiving services from utility companies despite bankruptcy as long as you provide them with a deposit to ensure continuous payment.