Bankruptcy

Most Americans love to have as much credit as possible because it makes life so much easier. Credit is a double-edged sword, however, because it can tempt to people into living beyond their means, and if they amass a lot of debt, and then they lose their job or their revenue source is cut off for any reason, then they start defaulting on their debt repayment plans.

This can lead to declaring personal bankruptcy. As part of the personal bankruptcy process, something called an "automatic stay" is put in place to stop all credit collection proceedings while the person's bankruptcy and financial situation is figured out.

What Is an Automatic Stay?

Automatic stays are a critical and early step in a person's process of declaring bankruptcy. An automatic stay, which is basically a type of injunction, protects a person's assets and income while the bankruptcy process figures out how the person should proceed financially.

An automatic stay puts a stop to a creditor's attempts to get the money they are owed, whether it's through relentless phone calls, lawsuits, the garnishing of wages, or other means of debt collecting at the creditor's disposal. An automatic stay has no bearing on the eventual outcome of a person's bankruptcy process, all it does is create breathing room for the bankruptcy court to straighten things out.

Needless to say, creditors take a pretty dim view of an automatic stay since it forbids them from getting their money back. The up side for creditors is that it could very likely end up with each creditor getting at least something back, as opposed to just one creditor getting all the person's assets and the other creditors getting nothing.

To learn more about automatic stays, debt collection, creditors, bankruptcy, and other financial topics, be sure to consult with a financial professional. He or she can advise you on how to avoid bankruptcy and automatic stays, as well as give you their professional opinion should you already be at the bankruptcy phase.

Personal bankruptcy is seen by most people as one of the worst possible financial outcomes, and something that will haunt them and their credit history and credit report forever.

In truth, personal bankruptcy saves many people's financial situations, and there are banks out there which can be considered bankruptcy-friendly. You may have to start off with baby steps, but you can get on the road to improved credit nonetheless.

People who have declared bankruptcy can take comfort in the fact that there are bankruptcy-friendly banks out there.

How these bank work

These banks seek to help people by extending small, secured lines of credit. These lines of credit are smaller and more secured (i.e., require more of your money as a deposit) depending on how recent your bankruptcy filing was. For example, if you declared bankruptcy six months ago, a bankruptcy-friendly bank might give you a secure credit card to the tune of $500. If you declared bankruptcy one year ago, you could get a secured card for $1,000.

The more time you have under your belt since you declared bankruptcy the more favorable your rates and credit lines will be.

How to find a bankruptcy-friendly bank

Finding a bankruptcy-friendly bank is easy to do on the Internet -- but you really need to be alert and aware before you sign anything, or enter into any sort of a financial relationship with one of these banks.

Some may be "willing to help you" by charging you outrageous interest rates under outrageous terms. In a word, these banks are both predatory and mercenary, in that they see you as more helpless due to your bankruptcy, and will seek to profit from your compromised circumstances.

Before you seek out bankruptcy-friendly banks, be sure to consult with a debt counselor. Better still, consult with any of the many consumer-advocacy groups out there who seek to protect people like you from predatory lenders. After all, there is a good chance that those predatory lenders are what got you into trouble in the first place.

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