If you have reached a point in your life where your debt has piled up and you are considering filing bankruptcy, then odds are that life hasn’t been too pleasant for you lately. One of the worst issues you will have at this time is the harassment by creditors, fear of repossessions, and utilities being turned off.
While these issues shouldn’t be the reason for filing bankruptcy one “benefit” (if it can be called that), is the automatic stay. The automatic stay is “automatically” put in place and accomplishes several things including protection against bill collectors, foreclosure, utility disconnections, and being evicted. There are some cases where it isn’t automatic such as when people have recently filed other bankruptcies. Here are some points of relief that the automatic stay can give you during this stressful time:
Foreclosure – An automatic stay will temporarily stop foreclosure. The creditor will probably be able to foreclose eventually if you file Chapter 7, but this will buy you some valuable time to make decisions. Chapter 13 bankruptcy is a better option if you want to keep your house and you can usually file a bankruptcy petition any time before the sale of your house. Utilities – If the utility company is threatening to cut off your water, electricity or gas, the automatic stay could give you up to 20 days of extra time. Once you file bankruptcy the automatic stay will force the utility company to reconnect your service if your utilities have already been disconnected. Wage Garnishments – Garnishments as in the case of child support and alimony will be completely stopped when bankruptcy is filed. Your paycheck will be protected and you will be able to take home a full salary and can also discharge the debt in bankruptcy. Eviction – Some help will be provided, but the new bankruptcy law makes it easier for landlords to evict you. If your landlord already has a judgment of possession against you when you file, the automatic stay won’t affect these eviction proceedings; the landlord can continue just as if you hadn’t filed for bankruptcy. Also if the landlord alleges that you’ve been endangering the property or using controlled substances there, the automatic stay won’t any good. In some cases, the automatic stay might give you a few days or weeks but the landlord can ask the court to lift the stay and the court will probably do so. Repossession – Your car cannot be repossessed while you have an automatic stay but this does not prevent you from having to handle the issue by reaffirming your car loan of returning it. You may be able to save your car with a Chapter 13 Bankruptcy but will have to make your trustee payments. Also, you need to be aware that a creditor can ask a judge to lift the stay so they can repossess.
As you can clearly see, an automatic stay won’t solve all your problems but it does give some temporary relief. It will stay in effect until you complete the bankruptcy and receive a discharge, the judge lifts the stay when a creditor requests it, and the property you want to protect is no longer a part of the estate. Be sure to read further information before you make any decisions about filing bankruptcy so you can be well-informed.