There are some legal jurisdictions in the United States which allow a legal procedure called bankruptcy protection which then will be used as an alternative to the more conventional proceedings called bankruptcy. Of course, prior to filing any kind of bankruptcy a person is well advised to ascertain if their debts will indeed be dischargeable by the bankruptcy procedure.
The applicable costs of bankruptcy as well as the benefits possibly gained need to be weighed very carefully. You will have to be made aware how long and how difficult the stigma of bankruptcy will follow you through your future. This is all available through a bankruptcy evaluation.
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The "protection" that is spoken about when someone speaks of bankruptcy protection relates to the cancellation or discharge of most of the debtor's debt. Prior to cancellation of such debts, it is common that some of the debtor's assets will be sold. Also a portion of bankruptcy protection may well necessitate that a very structured plan be brought into existence in order to pay off the assorted debts that are owed. Bankruptcy protection is found under the various bankruptcy laws of the United States.
Within those laws are listed the two different types of bankruptcy protection that is commonly extended to individuals, which are Chapter 7 and Chapter 13. In this case, the use of the word chapter actually delineates the exact chapter in the bankruptcy code of the United States.
If you looked up Chapter 7 you would find that it deals directly with such terms as "straight bankruptcy" as well as "liquidation". Both of those terms mean that a trustee will be appointed by the court to take over approximately all of the debtor's assets. Those assets are then sold, or liquidated, in order restitution payment to the debtor's creditors. There is, depending on the debtor's state of residence, some personal property that the debtor may exclude from such a liquidation sale. Once the courts agree to a dissolution or discharge of your debt, you are protected from communication of the creditor. This includes harassing phone calls, letters, emails or even personal contact. This will only work this way if the creditor did not obtain a judgment against you prior to your filing for bankruptcy. If they did, they can still keep trying to collect on the debt.
On the other hand, Chapter 13 that is colloquially known as the "wage-earner bankruptcy" will permit the debtor to actually make a proposal to the creditors that reflects a way to repay the debts incurred in lower interest or interest-free payments over a stipulated three to five year period, for instance. This type of plan is of course, completely subject to the bankruptcy court approval. The protection portion of Chapter 13 is defined as the fact that the debtor will be protected from certain actions of the creditors, such as collecting on the debt and in particular they are stopped from seizing assets. Once the court approves a payment plan the creditors must abide by the stipulated terms of the plan.
In most states, you will receive "bankruptcy protection" in the form of immediate relief from creditor harassment as soon as you've hired a bankruptcy lawyer, as the creditors now have been notified that they need to call your bankruptcy lawyer instead of you.
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