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Bankruptcy should not be seen as a way to avoid paying debt, but as a way to manage the debt you are unable to repay because you can no longer work.

What are the pros and cons of filing for bankruptcy?

Some benefits of filing for bankruptcy include:

  • Your creditors must cease any foreclosure, garnishment or repossession actions against you.
  • You may be allowed to retain some assets, including your home and your vehicle.
  • You can avoid default, repossession and lawsuits that result from missing payments.
  • You will have a fresh start at rebuilding your credit.
  • You may be able to discharge your medical debts.
  • You will no longer feel the stress of not being able to pay your debts.

Disadvantages include:

  • You may lose some of your assets.
  • You may have difficulty obtaining a mortgage for up to five years.
  • Your bankruptcy filing can remain on your credit report for up to 10 years.
  • All of your debts may not be discharged.
  • You may have difficulty obtaining a credit card or a loan for two years or more after filing for bankruptcy.
  • You may feel embarrassed by filing for bankruptcy.

What is a bankruptcy stay?

Once you file for bankruptcy, the court will issue a "stay" in your case. A stay will temporarily cease all collection attempts against you while your bankruptcy case is pending. If you own a home and a foreclosure sale already has been scheduled, the stay will delay the sale while your bankruptcy case is ongoing.

A typical bankruptcy usually lasts three to four months. A bankruptcy stay will, at the very least, give you some time to regroup and consider your options.

Are there any exceptions to a bankruptcy stay regarding my home?

There are exceptions to the rules regarding a bankruptcy stay. The first exception is if your lender asks the bankruptcy court to proceed with the foreclosure sale. It may still take two months or more, depending on the aggressiveness of the lender, for the court to lift the stay.

If you already have received a default notice on your mortgage, the bankruptcy stay will not stop the sale of your home. Each state has different rules that govern the amount of time the lender will be able to petition the bankruptcy court to lift the stay and to allow the sale to continue.

What are the different types of bankruptcy?

There are two common types of bankruptcy filings for individuals: