One of the most immediate advantages of declaring bankruptcy is the automatic postponement. Once your case has been filed with the court, notice of the automatic stay is sent to all of your creditors. This court order prohibits creditors from not only contacting you, but also attempting to collect the debt in question. Any violations of this order could result in severe consequences for the creditor and even endanger their ability to file a claim for repayment in your case.
Congregation Of Creditors
In bankruptcy, creditors are prohibited from collecting from you, but they retain certain rights. Creditors are permitted to submit a proof of claim and attend the 341 meeting of creditors. You will also be required to attend this meeting in order to respond to any inquiries regarding these debts. This may sound intimidating, but it is required by bankruptcy law to ensure that those who wish to submit a claim have the opportunity to do so. However, submitting a proof of claim does not guarantee a creditor any repayment, and not all creditors even attend this meeting.
The bankruptcy court determines which creditors receive repayment based on their priority status and, if applicable, the calculation of your income-based repayment plan. Not every creditor's proof of claim will be approved, and many may walk away empty-handed. Priority debts, including the Internal Revenue Service, domestic support obligations, and criminal restitution payments, are always paid first through a Chapter 13 repayment plan or Chapter 7 liquidation. Credit card and medical bills typically lie at the bottom of the list and are discharged with fewer or no fees.
After A Discharge
Once the court grants you a discharge, any dischargeable debts included in the case will be deemed satisfied and will remain uncollectible under the automatic stay. This means that if your medical debts are discharged and the creditor received minimal or no payment, those debts will never be collectible. Notably, the automatic stay will only grant immunity to the person who filed for bankruptcy on jointly held debts or debts with multiple responsible parties for repayment.""
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