When a boat starts to leak, the first step to fixing the problem is to plug the leak, before bailing out the water that has accumulated. Otherwise, no matter how hard a person tries to get rid of it, the water will keep filling the boat if the initial problem is not addressed.
The process of debt relief is similar, in that a person may find it difficult or impossible to continue paying off debt that accumulates if the initial issues are not first addressed. Debt collectors can be ruthless when it comes to pursuing debt owed by an individual, and therefore the person may not be able to find any relief unless they can put a stop to these creditors.
Fortunately, filing for bankruptcy helps individuals put an end to the collection activity. A bankruptcy petition imposes an automatic stay over all collection action undertaken by creditors. This means that creditors are prohibited from trying to collect on debts owed to them after the petition is filed.
Accordingly, creditors have to play by certain rules when a bankruptcy proceeding is initiated. After receiving notice of the bankruptcy, creditors have an opportunity to appear at a meeting, after which they can file objections to the debtor being allowed to discharge certain debt. For instance, in a Chapter 7 case, creditors typically are allowed 60 days after the meeting of creditors to file an objection. If the creditors fail to object within that time, the court may file an order allowing the debtor a discharge of his or her debts.
Ultimately, bankruptcy allows debtors to level the playing field with creditors. With the automatic stay, and the rules in place that govern what creditors may and may not do, the bankruptcy process helps individuals address their debt and formulate a plan to discharge the debt.
Source: United States Bankruptcy Courts, "Frequently Asked Questions," accessed on Oct. 3, 2014