When you are facing big debt problems and considering bankruptcy, there are many things it can be critical to be aware of. One is what protections the bankruptcy process typically provides. One such protection that individuals might find particularly attractive is the automatic stay.
Debt problems could lead to you being hounded by creditors. This can be a significant source of stress. You may worry about creditors disrupting your life. You also might be fearful about what sorts of actions your creditors will take. The automatic stay could provide important relief on this front.
What does it do?
The automatic stay is a legal mechanism that typically goes into effect during bankruptcy. It essentially hits the pause button on your creditors by temporarily putting a halt to most creditor lawsuits and actions. A couple examples of things the automatic stay typically can stop are wage garnishment and foreclosure proceedings.
How long are you protected by it?
Generally, when you file for bankruptcy, the automatic stay immediately goes into effect. In most cases, the stay halts creditor actions on you up until the point in which you receive a discharge. As a note, for creditor actions against property that was collateral against a debt, there is generally a different, shorter, timeframe when it comes to the length of the automatic stay’s protections.
Are there exceptions?
As a note, the above describes how automatic stays typically work. However, there are some critical exceptions. This includes that there are certain circumstances under which:
- The stay in general could be shortened in length
- The court will grant a creditor’s request to lift the stay for a specific action
- The stay won’t apply to a given action, as there are certain actions and lawsuits that such stays don’t affect
- A stay might not go into effect.
So, while the automatic stay can be a powerful protective tool, what particular protections it would and wouldn’t provide you depends on the circumstances. Given this, how the automatic stay would likely act in your specific situation is among the things you may want to get guidance on when considering bankruptcy.