When filing a bankruptcy petition with the court, debtors are frequently not completely aware of the rights the bankruptcy code gives them. One of the most significant rights is the ability to be exempt from creditors’ collection efforts after the bankruptcy petition has been filed. An automatic stay is important because it stops creditors from continuing to try and collect a debt at the same time, the bankruptcy petition is being processed in the court system. It allows the debtor to carry less of the burden of accumulating debt.
It’ll keep your lights on. The automatic stay will stop the disconnection of your utilities for at least 20 days. Your utility company cannot threaten to cut off your water, electric, gas, or telephone service because you are late on a bill. Although the cost of a power payment alone rarely makes filing for bankruptcy a good idea, it might if you have other debt you can discharge. Be aware that the utility company can ask you for a deposit to guarantee future payments.
It’ll Keep You in Your Home. The automatic stay may be helpful if you are being evicted from your home, but it is typically only temporary. The automatic stay won’t impact these eviction proceedings if your landlord already has a judgment of possession against you at the time of filing; the landlord can carry on as usual. The automatic stay won’t help you much if the landlord claims that you have been harming the property or using illegal substances there. In other situations, the automatic stay may give you a few days or weeks to move out, but the landlord would likely ask the court to lift it and permit the eviction, and the court will probably grant his request.
It’ll Stop Garnishments. When you file for bankruptcy, most garnishments are immediately stopped. You can erase eligible debt through bankruptcy, such as credit card obligations and personal loans, and receive your total wage. Be careful that debts frequently garnished—like those for continuing alimony and child support—won’t be forgiven. Depending on the bankruptcy chapter filed, past-due child support and back taxes will vary.
Most people want to know if they may maintain their property while considering Chapter 7 or Chapter 13 bankruptcy. The short response is perhaps. There is a catch to Chapter 7 bankruptcy: if you own too much property, the bankruptcy trustee may sell some of it and distribute the proceeds to your creditors.
What kind of property may you keep, then? Exemptions—state rules that outline what you are permitted to protect in Chapter 7 and Chapter 13 bankruptcy—determine the answer.
Exemptions allow you to protect a specific amount of assets during bankruptcy, including a cheap automobile, business equipment, clothing, and a retirement account. If an asset is exempt, you won’t have to worry about it being taken or sold for the benefit of your creditors by the bankruptcy trustee assigned to your case.
Many exclusions cover particular types of property, such as a car or furniture, up to a certain dollar level. In some cases, an exemption safeguards the entire asset’s worth.
Anything that isn’t protected by bankruptcy law is regarded as non-exempt, and, in Chapter 7, the trustee may sell it to recoup the debt. How much the debtor in a Chapter 13 bankruptcy will have to pay creditors whose debt is not secured by collateral is based on the value of the non-exempt property.
Non-exempt assets can include:
● Secondary residential property such as a vacation house
● A second car
● Investments (not including retirement accounts)
● Recreational vehicles like boats or motorcycles
● Musical Instruments
● Fur coats
● Extra televisions
● Coin collections
● Family heirlooms
There are numerous ways for a filer to prevent a non-exempt asset from being liquidated under Chapter 7 bankruptcy regulations. You can try to persuade the trustee to take an item of exempt property in its place if it’s important to you, or you can offer to repurchase the item from the trustee.
The trustee may determine that a piece of non-exempt property is too difficult to sell or isn’t valuable enough to warrant selling it to benefit the creditors. In that situation, the trustee will formally return the item to you by filing a Notice of Abandonment.