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What Exactly Is an Automatic Stay and How Does It Help You in Bankruptcy?

| Oct 18, 2017 | Bankruptcy |

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One huge benefit you will receive when filing for bankruptcy is something referred to as the automatic stay, which offers relief from creditors and is found in both Chapter 7 and Chapter 13 bankruptcy cases. If you do not understand what this is and what is included in it, here are several things you should know.

Definition of an Automatic Stay

An automatic stay is a court-ordered action that prevents creditors from pursuing someone who has filed for bankruptcy for any debts that they owe. Many people view this order as a way to find relief from creditor harassment, and this is exactly what it provides to people who file for bankruptcy.

When you owe money and cannot repay it, the creditors will call you, send you letters or texts or email you. Creditors take as many steps as needed to collect the money owed to them, and this overwhelms people when they cannot afford to pay the bills.

If you feel this way and want it to end, the automatic stay offers what you are looking for. Once the court orders this, you should never receive another letter, text, phone call or email asking you to pay your debt. The collections of your accounts will end immediately.

The automatic stay will remain until you complete your bankruptcy case. With Chapter 7 bankruptcy, it ends when the court issues a discharge of your debts. This normally takes less than one year.

When the automatic stay drops, any creditors you still owe money to can pursue you for the money you owe. Creditors cannot pursue any debts discharged through the bankruptcy, though.

With Chapter 13 bankruptcy, your automatic stay ends when you complete your repayment plan, which, in most cases, is five years. At that point, you should not have any past-due debts. The five-year plan helps you pay things off and get caught up with every debt you owe. In addition, you will probably have fewer debts when the plan ends simply from the payments you have made over this time frame.

How Automatic Stay Can Help You During Your Bankruptcy Case

Once you file for bankruptcy, your lawyer and the court will notify all the creditors listed on your bankruptcy paperwork. When your creditors receive this notification, they must legally abide by it by not contacting you for any reason at all. If they have questions, they must call your lawyer.

People filing for bankruptcy find relief through the automatic stay as it stops the following things:

Foreclosures

One of the few ways to stop a foreclosure is through Chapter 13 bankruptcy. The automatic stay issued stops a lender from pursuing foreclosure and forces the lender to wait to do this.

Repossessions

The automatic stay also stops all repossessions of vehicles if you are behind on your payments.

Wage Garnishments

If you have wage garnishments against you, the automatic stay stops those too. This includes tax payments, child support payments and most other types of debts.

Evictions

If your landlord sent you eviction papers, your automatic stay also stops that from going through so you can keep living there for a longer amount of time.

In addition, the automatic stay stops most other types of collections and creditors from trying to collect money from you or seizing things you own.

If you have financial problems and wonder if bankruptcy could help, contact SW Smyth LLP. They can help you determine the best route for you so you can find relief from your creditors and debts. Call today to schedule an appointment with one of their attorneys to learn if bankruptcy is the right option for you.