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What does bankruptcy do?

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When a debtor files for bankruptcy, immediately all of the debtor's creditors are prohibited from attempting to collect any debt that is included in the bankruptcy. The creditors are ordered to do this by what is called the "automatic stay." This helps give the debtors immediate relief and piece of mind because they are no longer receiving calls or letters from their creditors. Also, the most obvious benefit of bankruptcy is that it can either completely eliminate unsecured debt, or at least restructure debt into an affordable payment plan. However, this does not mean that the debtor has to give up all his possessions. Bankruptcy provides a way for debtors to retain real property and collateral if the debtor agrees to continue making payments on the collateral. In a chapter 13 case, the debtor may even be able to include those payments in the chapter 13 plan.