Bankruptcy and the Protections of the Automatic Stay

Bankruptcy Law Thwarts Pesky Creditors

If you are near the point of bankruptcy, you have probably experienced your fair share of creditor harassment. When you file for bankruptcy, the automatic stay prevents creditors from continuing to try and collect from you. This includes any attempts by phone or mail. In addition, while this bankruptcy protection is in place, they cannot sue you, garnish your wages, or repossess your car.

Protection from Foreclosures and Evictions

If your home is at risk of foreclosure, the automatic stay protection will help stop the foreclosure proceedings temporarily. Remember though, this protection is only short-term, as your creditors will eventually be able to resume with the foreclosure proceedings. Since the bankruptcy law changes in 2005, it is also now easier for landlords to circumvent the automatic stay and evict their tenants. However, as a tenant, you'll still find that the automatic stay gives you a few extra days or even weeks.

Meeting Your Everyday Needs

By filing for bankruptcy, the automatic stay will ensure that your living utilities aren't suddenly shut off. These utilities include your water, electric, and gas services. Again, while this provision is in place, it is only a temporary solution. It is also worth mentioning that while the automatic stay will prevent your services from being shut off, it may also help to reinstate these services if they have already been disconnected once you file for bankruptcy.

Avoiding Wage Garnishments

Filing for bankruptcy will immediately stop your wages from being garnished. In addition, if the debt qualifies under bankruptcy law, you may be able to even discharge it through your bankruptcy filing.

Vulnerabilities and Exceptions

The automatic stay is quite a powerful tool of bankruptcy. Due to its nature, there are certain limitations and exemptions where bankruptcy may not help. Generally, the automatic stay cannot protect you from IRS audits, tax demands, child support, alimony, and criminal proceedings. In addition, creditors can always go directly to the bankruptcy courts to request the automatic stay to be lifted. In these cases, if bankruptcy courts grant this removal, you will lose the protection of the automatic stay against that creditor. For more information about how the automatic stay will affect your bankruptcy filing, be sure to speak to a qualified bankruptcy attorney.

Sources:

• Nolo - Automatic Stay

About the Author:
Heindrick So works for a Bay Area Real Estate company that specializes in residential wholesale lending. His work experience is comprised mostly of sales and marketing background which included a high end media sales position at Magnolia Hi-fi. Heindrick is also in his final year of pursuing his Bachelor's Degree in Electrical Engineering at San Jose State University.