What is an Emergency Bankruptcy?
An emergency bankruptcy is one in which the debtor files a skeleton petition to quickly take advantage of the Automatic Stay. A skeleton petition, or the “bare bones” of a standard bankruptcy petition, can be filed in both Chapter 7 and Chapter 13. After filing your skeleton petition, you will have 14 days to submit the rest of your petition.
What is the Automatic Stay? What does it have to do with an Emergency Bankruptcy?
The Automatic Stay goes into effect the moment your bankruptcy petition is filed. It will stop your creditors from their preferred methods of collection, like wage garnishment, foreclosure, utility shutoffs, and repossession. Just like any other Chapter 7 or Chapter 13 bankruptcy, an emergency bankruptcy will trigger the Automatic Stay all the same. Unless certain special circumstances are present in your case, the Automatic Stay will remain in effect until your case is discharged or dismissed.
What are some reasons someone would use an Emergency Bankruptcy Filing?
One of the top reasons that people utilize emergency bankruptcy filings is because their wages are or are about to be garnished. A wage garnishment can take up to 25% or more of your income each pay period. Your creditors may even tack on extra fees for legal costs and interest. One of the few ways to stop a wage garnishment, besides paying it off, is to file bankruptcy.
An emergency bankruptcy can also help you postpone a foreclosure, repossession, or utility shutoff. If you can satisfy your balance in arrears during your bankruptcy, the collection will be canceled. If you won’t be able to catch up in time, you can also schedule a time for your lender to take back the asset. This can be less stressful and embarrassing, and won’t be as damaging on your credit report.
Why would I even need an emergency bankruptcy? Why can’t I just file at normal speed?
Your bankruptcy petition will likely be well over 50 pages long. For such a lengthy document to be complete and accurate, it will take several hours of drafting and review. Your garnishment may start in just a few days, or the repo man may be knocking on your door. The emergency bankruptcy buys you more time to prepare your full petition while under the protection of the Automatic Stay. If you don’t feel like your debt situation has arisen to an emergency level yet, a typical bankruptcy filing will probably serve you just fine.