Filing for bankruptcy can be a daunting and emotionally taxing process. It also provides a critical tool for those seeking relief from overwhelming debt — the automatic stay.
The automatic stay is a fundamental aspect of bankruptcy law that pauses most creditors’ actions against you. Every bankruptcy filer should understand three key aspects of automatic stay.
Immediate cessation of collection activities
As soon as your bankruptcy petition is filed, the automatic stay goes into effect. This means that creditors must immediately stop all collection efforts, including phone calls, letters, wage garnishments and lawsuits related to debt collection. This provides immediate relief from the constant pressure of creditors and collection agencies.
Foreclosure and eviction proceedings
The automatic stay also temporarily stops foreclosure actions on your home so you have additional time to catch up on missed payments or seek alternatives like a loan modification. In terms of eviction, the impact of the automatic stay can be a bit more complicated. It may not stop an eviction that was already ordered, but there are instances in which it can temporarily halt a nonpayment eviction.
Exceptions to the automatic stay
While the automatic stay is a powerful tool, it doesn’t apply to all debts and legal actions. It doesn’t stop certain types of legal proceedings, including specific family law matters like child support and alimony, criminal proceedings and some IRS processes. It’s crucial to understand these exceptions to fully grasp the scope and limitations of the protection offered by the automatic stay.
The automatic stay also keeps the bankruptcy process fair because it removes the ability of creditors to circumvent the hierarchy of payments by collecting outside of the filing. Working with someone familiar with the process is beneficial.