Filing for bankruptcy can offer you an opportunity to pay off debts at a pace that favors you. It can also help you by having you exempted from paying off debts that have overwhelmed you. However, the decision to file for bankruptcy is never easy. Lack of enough knowledge is one of the main reasons many people delay making the decision to file for bankruptcy.
Before filing for bankruptcy, you must familiarize yourself with bankruptcy terms. This article will help you understand one of the terms you will come across immediately after filing for bankruptcy. Regardless of the type of bankruptcy you are considering filing; an automatic stay is a vital tool for you.
Below is some vital information on what an automatic stay is and how it can help you.
Understanding What the “Automatic Stay” Is and What It Can Do
After filing for bankruptcy, a court instructs your creditors to halt any collection activities against you by issuing an order known as the automatic stay. The court order applies to all types of creditors, including governmental entities. As long as an automatic stay remains in effect, no individual or agency has the right to collect their debt from you. The automatic stay, which was enacted in 1978, exists under Section 362 of the U.S bankruptcy code.
The purpose of the court order is to allow the court enough time to administer the estate in an orderly manner without creditors harassing, pestering, contacting, or suing you. Any creditor that goes against the order disobeys the law, and a court can declare their actions as void.
An automatic stay not only stops creditors from harassing or contacting you but it also prevents other common crises that could negatively affect you. Here is how an automatic stay may help you:
- An automatic stay prevents foreclosure. Losing a home is one of the biggest fears of debtors once they decide to file for bankruptcy. The automatic stay stops any foreclosure proceedings. Once the court issues the order, you have the right to take legal action against any creditor that chooses to continue with the foreclosure process. Mortgage holders can eventually proceed with the process once the order is no longer in effect, but the court expects them to allow you some breathing space until then.
- The court order halts wage/salary garnishments. Wage garnishments, which involve an employer holding back your wage or salary and giving it to creditors, can negatively impact you when the amount you receive after the deduction cannot sustain you and your family. An automatic stay prevents any employer from holding back a part of your salary and giving it to creditors.
- The court order can help you avoid utility disconnections. If you are behind on paying your water, gas, or electricity bill, an automatic stay will prevent a company from disconnecting you. Nonetheless, utility bills rarely equal an amount that justifies filing for bankruptcy. Still, when you have other debts you need to discharge, you could file to have the utility bills terminated or re-arranged as well.
Remember that the automatic stay does not apply to all debts. Here are some of the exempted debts.
- Certain tax proceedings
- Criminal court cases
- Loans taken from some retirement accounts
- Family support obligations
- and others
Allow Us to Help You Today
To receive more information on an automatic stay and filing for bankruptcy, contact the law office of Julianne Frank Esq., at 561-320-7971 and schedule a consultation. Our Jupiter bankruptcy attorneys can assist you with your case.