Bankruptcy has several benefits, but for many debtors the biggest benefit is the ability to stop foreclosure of a home or repossession of a vehicle. The reason this is possible is because the Bankruptcy Code has an automatic stay provision which prevents creditors from pursuing collection of debt after bankruptcy is filed without the court’s permission. Beginning the moment the bankruptcy case is filed creditors are prevented from pursuing any collection activity. This includes lawsuits, harassing phone calls, wage garnishment, repossession of vehicles and foreclosure of homes.
The automatic stay doesn’t last forever. The stay expires upon dismissal or discharge of the bankruptcy case. It can also be lifted by the court if the debtor isn’t taking steps to adequately protect the creditor’s interest. This includes making payments that come due after the bankruptcy filing date for homes, making car payments if the loan isn’t included as part of the reorganization plan, and not keeping the property insured. Even when these types of situations occur, courts are hesitant to lift the automatic stay if the debtor explains their situation and how they intend to correct the problem. North Texas courts will usually give the debtor one last chance to cure the problem and maintain possession of their secured property.