The moment you file for bankruptcy a “stay” on all collection activity goes into effect. The stay goes into effect automatically, accordingly, it is called the “automatic stay.” The automatic stay acts as a temporary restraining order on collection activity such as creditor phone calls, collection letters, lawsuits, foreclosures, repossessions, wage garnishments, and enforcement of most judgments. The stay is in place until the case is closed – either through operation of law after your discharge, or upon dismissal for cause.
At the end of your case (typically in a matter of months in a Chapter 7 case) you receive a discharge. A discharge is essentially a permanent injunction on collection of certain debts, in certain ways. A discharge actually eliminates your legal responsibility for most unsecured debts, such as credit cards, medical bills, etc. It actually eliminates your personal responsibility for secured debts as well (such as a home loan or a car loan), however, the discharge alone does not extinguish the secured lender’s rights to the collateral you pledged when you took out the loan (i.e., the house in the case of a mortgage or the vehicle in the case of a car loan). The lender can still foreclose on your mortgage or repossess the vehicle if you do not make your required payments. If there is a deficiency after the foreclosure or repossession, then the lender cannot recover the remaining balance due under the loan from you personally.
Certain other debts are non-dischargeable. Typically priority debts (such most taxes), domestic support obligations and certain deposits are non-dischargeable. In addition, education loan obligations (such as student loans and so-called parent loans) survive the bankruptcy.
If you are struggling with debt you should talk to an experienced bankruptcy attorney as soon as possible. To schedule a free consultation call the Law Offices of James Wingfield today or visit the contact page on our website.
