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What is an automatic stay in bankruptcy and how can it help you?

On Behalf of | Jul 14, 2022 | chapter 13 bankruptcy, chapter 7 bankruptcy |

When you file for bankruptcy, you want protection from your creditors and the bill collectors that are hounding you.

Fortunately, you can depend on the power of an automatic stay. What exactly is this and how can it help you?

A power tool

When you file for bankruptcy protection, you activate an automatic stay that provides a number of benefits. First, it protects you from creditor harassment. It also puts a stop to any lawsuit that a creditor, government agency or individual seeking money files against you. However, there are other ways an automatic stay can make your life easier:

  • Stopping foreclosure: The automatic stay will halt any foreclosure proceedings your financial institution may have begun.
  • Blocking wage garnishment: Once the automatic stay is in place, wage garnishments will cease until the stay is lifted.
  • Delaying disconnection of utilities: If you are behind on your utility bills, the automatic stay will prevent service disconnection for at least a few weeks during which you can make payment arrangements.
  • Controlling eviction: An automatic stay can delay an eviction proceeding. Keep in mind that courts usually side with landlords who have lawful reasons for evictions.

About criminal proceedings

If you are dealing with a legal proceeding that includes both a criminal portion and a debt, an automatic stay will only halt the debt portion. You will still have to face the criminal side of the proceeding.

Limited assistance

An automatic stay will not protect you against an IRS audit or from a demand that you file a tax return. It will not halt a lawsuit for the modification or collection of child support payments. However, in many other ways, this important tool will make your life easier as you navigate the bankruptcy process.

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