What is Automatic Stay in A Bankruptcy Filing?

If you have filed bankruptcy or know someone that has, you may know firsthand or have heard that the major benefit in all this is the automatic stay. What is automatic stay in a bankruptcy filing? Glad you asked. It is a legal procedure that takes effect once the petition for bankruptcy has been filed with the court. What it does is to stop all of the creditors listed on the bankruptcy from making contact with any debtor. It also stops all attempts at collecting the debt. This is especially true in a Chapter 7 bankruptcy.

 

 Aggressive Creditors

You may have experienced the aggressive behavior of some of these creditors, putting fear in you. For that reason, you may not want to answer your phone because of the grueling confrontation telephonically from creditors that use aggression to attack you personally. An automatic stay will prevent this from happening. It will also stop the delinquent letters from being mailed to your house.

The automatic stay will stop any creditor from administering:

·       A lawsuit against you

·       A judgment against you

·       Foreclosure

·       Wage garnishment

 

 Bankruptcy Court

The United States Bankruptcy Court gives power to the automatic stay procedure, standing behind it and not allowing any debtor to be harassed by creditors. This is a time when you will have peace of mind and less stress from dealing with creditors and worrying about your finances. When a person does not know what else to do in terms of finding a solution to the financial burden being experienced, it can become overwhelming. The automatic stay provides the relief needed to regroup, helping the consumer to move forward with more clarity during the bankruptcy filing.

 

 Bankruptcy Mechanism

For many people, a bankruptcy filing is the ultimate appeal since the automatic stay is a part of the process. Of course, to understand the impact of the automatic stay, you have to know how it really works and how it can help you. In most cases, it will depend on your particular situation. In a nutshell, the automatic stay is like a mechanism in bankruptcy court that allows for the filing to immediately kick in. This means that you don’t have to wait for the completion of the case in order to get relief from creditors. That is why, once you make the decision to file bankruptcy, you must do so right away to keep the creditors at bay. Lawsuits will come to a screeching halt and the creditor has to cease other legal actions.

 

 Cease All Contact

Once the petition for bankruptcy has been filed in the court, what happens next? The court will send out notices to the creditors immediately, providing information about the automatic stay and the filing. If the creditor tries to make contact with the debtor, the person can just let the creditor know that bankruptcy has been filed, providing a case number to the creditor. The person can also let the creditor know to cease all contact or they will be violating the automatic stay.