Power of the Automatic Stay
When your bankruptcy petition is filed, the Automatic Stay takes affect, offering you powerful legal protection against creditors and bill collectors
Filing bankruptcy extends you a level of protection that no other method of debt resolution can offers. The automatic stay starts immediately after your case is filed, stopping collections, phone calls, letters and any other approaches from your creditors to collect from you. This is particularly beneficial if you're about to be evicted, foreclosed on or losing resources like utilities, welfare and unemployment benefits.
What the Automatic Stay Prevents
Utility Service Disconnects. You may be behind on your utility bills and the service company growing inpatient with your lack of payment, so they threaten to stop water, electric, gas and telephone service. The automatic stay will allow you to keep your utilities for another 20 days. Although the amount of money you pay your utilities companies is hardly the reason for filing bankruptcy, preventing you from freezing to death in the winter is a good enough justification.
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Stops Foreclosure of your Property. The automatic stay temporarily stops the foreclosure process with your bank or mortgage lender. Typically after filing bankruptcy, your lender will be petitioning for the stay to be lifted so they can proceed, unless you reaffirm the debt, meaning you agree to start paying your monthly mortgage again, the lender must proceed with foreclosure. If you want to keep your home, Chapter 13 is usually a better choice.
Stops Evictions. The automatic stay can also provide some help if you're being evicted from your rental home. However the new bankruptcy law changes make it a little easier for the landlord to proceed. If the landlord has a judgment of possession already at the time you file bankruptcy, the automatic stay won't be able to protect you. Also if your landlord can prove that you have endangered the property or that illegal substances have been found at the properly, this will null any protection the stay can give you. In other cases the stay can buy you a few weeks, but again the landlord will be petitioning to get the stay lifted as well.
Stops Collections Agencies and Your Creditors from Contacting you. The automatic stay flexes its powerful muscles particularly in this case. Especially if you're filing chapter 7 and need to discharge lots of unsecured debt. Typically when you owe money to credit card companies and stop paying, your delinquent account is sold to a collections agency who then do everything possible and sometimes with very aggressive methods to get you to pay your overdue bill. The automatic stay clearly states that your creditors and collectors are no longer allowed to contact you via any means or harass you about your debts. In chapter 7, they will simply never collect on the unsecured debts you're about to discharge. In chapter 13 they must now abide by a new repayment plan approved by the court.
Stops Wage Garnishments. If your creditors or collections agencies manage to get a judgment against you and put a wage garnishment on your salary, the automatic stay says your wages are no longer garnished while you're in bankruptcy proceedings. Depending on what chapter you file under, the debt for which your debts are being garnished may have to repaid (chapter 13) or completely dropped if filing chapter 7. However if a judgment exists on your debt, it may have to be resolved differently. In cases like this your best choice is to get bankruptcy evaluation from a professional attorney to find out for sure where your judgment stands.
What the Automatic Stay Cannot Prevent
There are a few instances in which the automatic stay won't be able to help you, and here is a short list of those:
- Tax Proceedings - IRS can audit you even during bankruptcy
- Child Support - Including alimony will always have to continue to be paid for
- Criminal Proceedings - If you're on trial or being prosecuted under criminal charges, the stay won't help here
