When you file for bankruptcy, an automatic stay can be a lifesaver. It won’t solve your problems, but it does give you some breathing room while you get your finances under control.
An automatic stay prevents creditors from trying to collect from you for debts incurred before you filed for bankruptcy. It stops any foreclosure actions, harassment and collection efforts against you by a creditor or collection agency. It remains in effect until the court lifts the automatic stay.
How a stay helps your financial situation
There are several financial benefits from an automatic stay. An automatic stay stops foreclosure proceedings, evictions and utility shutoffs, allowing you time to stay in one place to get your finances in order.
- A stay will stop the utility company from shutting off telephone, gas, electricity or water for up to 20 days.
- A foreclosure will be halted while the automatic stay is in place, but will start again as soon as the stay is lifted.
- If you were overpaid public benefits and a government agency is looking for you to pay those benefits back, an automatic stay will stall that effort.
- An automatic stay also stops all wage garnishments. This is especially effective if you have multiple wage garnishments.
What an automatic stay won’t do
If you are renting and your landlord already has a wrongful possession judgment, an automatic stay won’t stop the eviction process.
Also, an automatic stay will not stop some tax proceedings, child support payments or repayment on loans from your pension.
If you have filed for bankruptcy within the previous year, then the automatic stay from the newest bankruptcy will end within 30 days. You can try to get a longer stay if you can convince the court your bankruptcies were filed in good faith, but if a creditor has filed a motion to lift the automatic stay in your previous bankruptcy case, then it is presumed that your current bankruptcy was filed in bad faith.
If you have a debt that is involved in a criminal proceeding, the automatic stay will only affect the debt portion – a stay will help you with restitution but not with jail time, probation or community service.