The Automatic Stay in Bankruptcy

When you file for bankruptcy, there is such a thing as automatic stay which involves your creditors. Many question what this is and if it is important to the bankruptcy process so here is what the automatic stay is all about:

The automatic stay in bankruptcy keeps your creditors from any lawsuit filed against you and most actions against your property by a creditor, collection agency or any government identity you have debts from. This means that they cannot make you pay nor collect money or any other property from you during the entire bankruptcy process or until the automatic stay is in progress.

What It Can Prevent

  • Utility Disconnections

If you are behind any type of utility bill and the company you get those from are threatening you to cut or disconnect your water, electricity, gas, or telephone service, the automatic stay can prevent this from happening for at least 20 days.

  • Foreclosure

If your house is facing foreclosure, you will be able to save it temporarily with the help of the automatic stay. If you are facing foreclosure, Chapter 13 bankruptcy is usually a better remedy than Chapter 7 bankruptcy, if you want to keep your house.

  • Eviction

With the help of the automatic stay, it may be possible to stop you from getting evicted from your home. The automatic stay might buy you a few days or weeks, but the landlord will probably ask the court to lift the stay and allow the eviction and the court will probably agree to do so because of the new bankruptcy law.

  • Multiple Wage Garnishments

When you file for bankruptcy, you will be able to stop the garnishments. Although no more than 25% of your wages may be taken to satisfy court judgments and up to 50% for child support and alimony, many people file for bankruptcy if more than one wage garnishment is threatened.

Though automatic stay is something which the bankruptcy court instills on all of your creditors, it is possible for them to get around them and ask for the court to lift the automatic stay. This usually happens if it does not serve its intending purpose to keep creditors from collecting from you. This would also be possible in situations wherein the creditors can prove that you have done something which requires action and need their automatic stay to be lifted like paying debts to certain creditors during the bankruptcy process.


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