Prior to filing for bankruptcy, you likely have been bombarded with calls, messages and emails from creditors demanding their money.
Filing for bankruptcy will create an automatic stay. This will stop any creditor or bill collector from seeking to get their money back from you.
What’s the intention?
The idea behind the automatic stay is to give the creditor some breathing space and for the court to gather all the debts, assets and every other item that pertains to the bankruptcy into the same court where everyone’s rights can be ensured.
The automatic stay prohibits:
- Collection calls
- Auto repossession
- Home foreclosure or eviction
- Utility disconnection for at last 20 days
- Most evictions
The stay affects only the debtor in Chapter 7 bankruptcies, but does protect the co-debtor in Chapter 13 bankruptcies.
The stay is in effect until the case is discharged or closed, the item or property is no longer part of the estate, or the judge lifts the say.
Caveats to the automatic stay
Not all items are affected by the stay. Criminal proceedings, child support, pension loan repayments and collection of tax information are all allowed to continue (but tax collections are stayed).
Remember, however, that the automatic stay does not extinguish debts – it only postpones them while the bankruptcy hearings are taking place.
After you file for bankruptcy, the court will send out notices to all your creditors within the next business day or two. The creditor can then file a motion for relief with the court to continue to liquidate your assets. The court will conduct a hearing within 30 days. If you are found to have acted in bad faith, or of the value of the property does not exceed the amount owed on it, or if you have filed for Chapters 11, 12 or 13 and the property is not necessary to reorganization, the court may allow the stay to be lifted.