What Is the Automatic Stay in Bankruptcy?

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What Is the Automatic Stay in Bankruptcy?

In any bankruptcy case, the automatic stay is an important provision that protects those filing for bankruptcy from their creditors. More specifically, the automatic stay prevents creditors, collection agencies, and the government from initiating or continuing any effort to collect a debt cited in the bankruptcy filing.

This means that an automatic stay can prevent or freeze activities such as these:

  • Harassing communications
  • Foreclosure
  • Eviction
  • Wage garnishment
  • Utility shutoffs
  • Legal proceedings initiated by creditors

There are many more collection actions that apply to the automatic stay, so you should consult with a bankruptcy lawyer if you’re concerned about any specific action. In essence, however, this powerful provision protects bankruptcy filers from most efforts to collect a debt while their bankruptcy case is open.

How Long Does an Automatic Stay Last?

A judge issues an automatic stay for the duration of the bankruptcy case, so you can expect this provision to last until the court settles your case. This can last approximately three or four months for a Chapter 7 bankruptcy case and between three and five years for a Chapter 13 case.

Can the Automatic Stay Lift Before My Case Settles?

Yes. Creditors can petition the court for relief from the automatic stay; if successful, a creditor can pursue collection while the bankruptcy case remains open. This can be common in Chapter 7 cases, when creditors of secured debt petition the court for relief to continue with the foreclosure of a home or repossession of secured property.

Does an Automatic Stay Stop Payments & Interest from Accruing?

No. Although creditors may be barred from foreclosure, repossession, or wage garnishment to collect debt, the automatic stay doesn’t freeze payments or interest from accruing. This may not be as important of an issue if you’re trying to discharge consumer debt, but other debts – such as child support and student loans – can’t be discharged with bankruptcy and will continue to accrue during the process.

You should consult with a professional bankruptcy attorney to learn more about how the automatic stay can affect your financial obligations while your bankruptcy case is open.

Need Help with Bankruptcy? Contact Us Today.

You have rights during the bankruptcy process, and the automatic stay is a provision that protects you from creditor harassment and unlawful attempts to collect debt. If you need help with bankruptcy or any issue that concerns it, we at Buchalter & Pelphrey Attorneys At Law can provide the assistance you require.

Reach out to our capable team of bankruptcy lawyers today for more information.

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