- Once you apply for bankruptcy protection in a U.S. court, your creditors are barred from continuing collection practices against your delinquent accounts. This includes debt-collection phone calls and even civil suits. Each of your creditors receives a written notice from the court informing them of these protections granted to you by your bankruptcy application. This provides you with some respite from the stress associated with debt collection.
- If you have applied for Chapter 13 bankruptcy, the protection granted to you extends to your real property, like your home or place of business. This means a creditor cannot foreclose on your loans and take your property away from you while your bankruptcy application is being processed. If your bankruptcy is approved, it is illegal for your mortgage lender to attempt foreclosure proceedings as long as you continue to make timely payments according to your debt management plan.
- It's true that bankruptcy of any kind hammers your credit score, but by no means is your credit score "down for the count." According to MSN Money Central, your credit score begins to improve immediately following your bankruptcy approval. Securing new credit may be difficult but it isn't impossible. The fresh financial start granted by your bankruptcy can help you adopt the responsible financial practices that can quickly repair your credit score A consumer interviewed by MSN Money Central was able to repair his credit score within four years after his Chapter 7 bankruptcy case closed.
- All the safety granted by a bankruptcy hinges on your responsibility. If you mislead the bankruptcy court about your finances, income or assets, your bankruptcy may be rejected. Your bankruptcy could also be rescinded if you fail to make timely payments in a debt repayment plan. Once bankruptcy protection is lifted, debt collection practices may resume, unabated.
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