Does Bankruptcy Protect my Property from Creditors?
In the Sacramento area bankruptcy clients often ask me how to stop creditors from filing a lawsuit against them, garnishing their wages, levying their bank accounts, or placing a lien on their property. In short, they are concerned that a credit card company or other creditor will take property from them because they have a past due debt with the creditor. When you are having trouble making regular monthly payments, the last thing that you can afford is for creditors to take money from your bank accounts or paychecks.
Fortunately, when a debtor files bankruptcy it triggers an automatic stay against most creditor action. With some exceptions, the automatic stay protects debtors by freezing the collection and enforcement actions against them for a certain period of time.
Protection from Lawsuits?
Some of my clients were in default with a credit card company. After several months of nonpayment the creditor filed a lawsuit. Considering the consequences of the creditor's action, I filed a Chapter 13 bankruptcy on their behalf. Had the creditor been allowed to continue its lawsuit and obtain a judgment, my clients' would have been at risk of having a lien attached to their home.
Stopping Wage Garnishment?
In most cases, the automatic stay gives debtors protection against wage garnishment as well, even if the garnishments have already started. While some creditors may obtain relief from the stay, the creditor must have a valid reason for obtain such relief.
Can You Protect Your Home From Foreclosure?
Filing bankruptcy may stop or delay the foreclosure sale of your home, even if the payments are several months late. This is because a foreclosure sale is considered an enforcement action, whereby the creditor attempts to collect on the mortgage debt. While the foreclosure is only barred until the mortgage company obtains relief from the automatic stay, the delay may give the debtor enough time to decide how to deal with the debt on their home.
