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August 20,2019

The Immediate Effects of a Bankruptcy Filing

Bankruptcy cases take time to prepare, as well as to obtain a discharge from the court. A Chapter 7 bankruptcy case may take three to six months, or longer if there are complications. Chapter 13 cases generally last three to five years before you can obtain a discharge. While you might be dealing with the bankruptcy process for some time, there are certain immediate effects of filing a bankruptcy petition of which you should be aware. Our experienced bankruptcy lawyers in California can advise you of how a filing may affect your specific situation.

Positive Effects

Prior to bankruptcy,  many people do not want to open their mail or answer the phone out of fear a collector is calling. Creditors may file collections lawsuits and obtain judgments and wage garnishment orders, which can only make your financial situation worse. Mortgage lenders or landlords may initiate foreclosures or evictions, and you may worry about where you are going to live. 

The good news is that filing for bankruptcy can provide almost immediate relief for all of the above circumstances, as the court will order an automatic stay. This stay prevents your creditors from collections pursuits, including halting legal cases and garnishments. The automatic stay can stop the following, at least temporarily:

  • Collection letters and calls
  • Foreclosures
  • Evictions
  • Utility disconnections
  • Vehicle repossessions
  • Wage garnishments
  • Creditor lawsuits and other legal actions

The automatic stay cannot halt divorce or criminal proceedings, child support obligations, or some tax liens. However, it can provide significant relief from many collection actions. 

Potentially Adverse Effects

While you can receive many benefits from a bankruptcy filing, you also must give up certain control to the bankruptcy trustee. The court will assign a trustee to your case who will look into all of the details of your financial situation. You will not be able to sell property or assets, make large purchases, or make other financial moves without first obtaining the permission of the trustee. Doing so can cause problems with your case, including delays and possible dismissal without discharge in some situations. 

It is important to have the right bankruptcy attorney handling your case, including all communications with the trustee. Your attorney can advise you when you should not take certain financial actions that may jeopardize your case. Having the right legal guidance and representation can prevent setbacks or complications, and can help you successfully finish the bankruptcy process as soon as possible.

Contact a California Bankruptcy Attorney for More Information

The bankruptcy lawyers at Miranda, Magden & Miranda, LLP help clients navigate the bankruptcy process and obtain a discharge, allowing them to move forward with their lives without constant financial stress. We have offices in Monterey and Salinas, and we can evaluate your best options, so please do not hesitate to contact us directly today.

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