Filing for bankruptcy because you’re unable to handle your bills probably isn’t a decision that you made lightly. One of the perks of this is that the automatic stay goes into effect when you file. This prevents creditors from being able to try to collect any money from you. They can’t send mailed demands, call you to seek payment, send you electronic collection notices, send someone to collect in person or file a lawsuit against you to get the money.
The automatic stay is certainly a nice benefit for the filer, but the purpose of this aspect of bankruptcy is central to these cases. When a debtor files for bankruptcy, they have to list all their creditors. The bankruptcy code sets specific priority levels for debts. The bankruptcy trustee disburses money from the bankruptcy case based on the priority levels assigned to debts.
In almost all cases, creditors will receive less than the balance due when you file for bankruptcy. Any remaining balance on an account is discharged when you successfully complete the bankruptcy process. Without the automatic stay to prevent collection attempts, creditors could attempt to circumvent the bankruptcy process to get more money than the other creditors in the case.
The automatic stay places all creditors on a level field during the bankruptcy process. An even more important benefit for the filer is being able to enjoy a fresh financial start once the case is over. Discuss the specific points that apply to your case with your attorney to ensure you’re doing what you feel is best for your situation.