When filing bankruptcy people are required to go through the credit counseling and this will result in the client obtaining a certificate, and it is this document that alerts the creditors not to try to collect on the bad debts or try to take any legal action. Rebuilding a credit rating can take quite a bit of time, but is not so bad if you’re debt free in the process.
Once the petition has been filed, the creditors that are owed money cannot come after the person who owes the money. This is called an automatic stay from court. Also, there can be no legal action taken against the debtor. Therefore, all those annoying creditor calls will go away. Learning all about Bankruptcy will provide information showing that this procedure is for those owing a lot of unsecured debt such as money owed to credit card companies, unsecured loans and possibly medical debt. This type of bankruptcy may required the person to sell personal property in order to pay off some of the money owed, whereas in chapter 13 bankruptcy, the person may have suffered a financial setback due to a job loss or a long term illness and just needs some time to get back on their feet. For this situation, the chapter 13 bankruptcy filing can provide relief by staying the creditors from legal action and collection, but give the debtor time, over a course of a few years, to pay back the loans or bills. This can help stop any actions to take away a house or possessions. Not participating in the credit counseling can mean the case could be rejected or thrown out.