Topeka Capital

Bankruptcy Basics

Bankruptcy is a legal process that provides relief from creditors and debt. Bankruptcy is a powerful legal tool that can immediately stop collection calls, stop garnishments, stop repossessions, stop foreclosures, and provide a means to deal with your creditors. It is an opportunity for a fresh start and an end to the stress caused by debt.

The bankruptcy process begins with the filing of a Petition and Schedules. These documents disclose information about property you own, debts you owe, your income and household expenses, and various financial transactions that took place in the years prior to bankruptcy. Upon the filing of these documents, the Court sends out a notice to all creditors so they know that a bankruptcy has been filed.

As soon as the Petition is filed, a rule called the Automatic Stay goes into effect. This rule prevents creditors from taking any action to collect on a debt. This means creditors must immediately stop all collection efforts, including phone calls, sending bills or collection letters, lawsuits, garnishments, repossessions, and foreclosures.

A Bankruptcy Trustee is assigned to each case. The Trustee is an attorney appointed by the U.S. Department of Justice to administer the bankruptcy case. It is the Trustee’s job to collect money or assets from a debtor in bankruptcy and distribute money to the creditors.

Successful completion of a bankruptcy case results in an order from a federal court declaring that a debtor is no longer obligated to pay the dischargeable debts owed at the time the bankruptcy case was filed. In short, it wipes away credit cards, medical bills, utility bills, and pay day loans. Additionally, it provides a means to deal with tax debt, high-interest auto loans, missed mortgage payments, and more.

If you need a fresh start and relief from creditors, continue to: Is Bankruptcy Right for Me?