Have you found yourself sitting at the kitchen table looking over bill after bill while hoping your phone does not ring since it is most likely a collection call? To add to your frustration, you know that you have very little in your bank account to pay the bills and penalties and fees for being late continue to add to your debt.
This may be the point when you have decided to file for bankruptcy. A bankruptcy is like hitting the reset button on your finances. While it can be of great financial benefit to you, there are circumstances that come along with bankruptcy that are important to consider. However, one positive aspect from bankruptcy is the moment you begin working on your bankruptcy, an automatic stay on your creditors will begin.
What is an automatic stay?
During your bankruptcy, an automatic stay will automatically be applied which will immediately stop all creditors from contacting you and will put an injunction on most lawsuits that may have been filed against you. An automatic stay will also protect your property from collection or government agencies. The stay is put into effect immediately after you file a bankruptcy petition and an automatic stay applies to both Chapter 7 and 13 bankruptcies.
What can an automatic stay do?
If you are dealing with calls from credit card companies for payment, those calls will immediately stop with your bankruptcy. You may never hear from those companies again if their debt is eliminated after your bankruptcy. Here is what else an automatic stay can do:
- Foreclosure – If you are going through a foreclosure, an automatic stay will provide a temporary halt to the proceedings. With foreclosure, the stay is not permanent. You will get a certain amount of time to get your finances and bankruptcy in order, but a foreclosure will proceed at some point regardless of your bankruptcy.
- Eviction – Just like with a foreclosure, the proceedings will be suspended but will resume at some point.
- Utility bills – If you have missed payments to utility companies and they are threatening to disconnect your water, electricity or phone service, the automatic stay will delay the disruption of these services for at least 20 days.
- Wage garnishments – If you are having your wages garnished to pay off a creditor, the automatic stay will stop the garnishment and you will have the full amount of your pay appear on your check.
One of the biggest exceptions to an automatic stay is child support and alimony support payments. An automatic stay will not allow you a temporary or permanent stop to these payments. If you are paying either of these, you should continue to pay them even if you file for bankruptcy.
Your bankruptcy will be a time to get your financial situation in order. An automatic stay is a way to ease the pressures to some of the debt you have and give you time to work with a bankruptcy attorney.