The automatic stay is a crucial aspect of bankruptcy proceedings, offering temporary relief to debtors by halting most collection actions against them. This means that creditors can’t call you, mail bills to you or do anything else to try to collect money from you once you file for bankruptcy.
The automatic stay levels the field for all creditors in a bankruptcy case as well. It prevents them from being able to circumvent the bankruptcy proceedings to collect more than their fair share. This is important because creditors aren’t likely going to receive the full balance that they’re due from a debtor.
The automatic stay takes effect immediately upon the filing of a bankruptcy petition. Besides contacting debtors to collect money, the automatic stay can stop foreclosures and garnishments. This temporary pause will allow you the opportunity to assess your financial situation and seek solutions while your finances remain under the protection of the court.
Not all debts are covered
Although the automatic stay offers broad protection, there are some exceptions. These can include certain tax proceedings, child support and alimony obligations, criminal proceedings and the collection of debts from a co-debtor who has not filed for bankruptcy. Additionally, if you have filed multiple bankruptcy cases within a short period, the automatic stay may be limited in duration or not take effect at all, depending on the circumstances.
Creditors can request relief from the automatic stay
In some situations, a creditor may believe that the automatic stay is causing them undue hardship or that their collateral is at risk of losing value. In these cases, the creditor can file a motion with the bankruptcy court requesting relief from the automatic stay. If the court grants the motion, the creditor can resume their collection efforts against you, but you have the right to object to the motion. The court will consider both sides before making a decision.
The automatic stay is only one factor to consider if you’re trying to determine whether to file for bankruptcy protection or not. This could be the important first step in reclaiming your financial freedom.