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What is an automatic stay in bankruptcy?

On Behalf of | Feb 3, 2021 | Bankruptcy |

One of the most stressful things about owing money to creditors and being unable to pay is having to deal with the collection attempts. Many creditors are ruthless in these attempts, which can include phone calls, letters, emails and even personal visits. Getting these to stop is often a priority for people who owe money. 

Filing bankruptcy might be your answer. The automatic stay is often a source of immediate relief for many who file.

How does an automatic stay protect you?

When you file for bankruptcy, the court issues an order that requires your creditors must stop their collection attempts. This is the automatic stay. It is illegal for them to continue collection efforts as long as the automatic stay is in effect. Typically, this stay remains in place until the bankruptcy is discharged. 

Why is the automatic stay important?

The automatic stay is important because it keeps creditors from trying to circumvent the payment laws that come with bankruptcy. Most creditors won’t receive full payment once a person files for bankruptcy. All debts are sorted into specific priority categories and then paid according to an order that’s established by law. The automatic stay stops creditors from “jumping the line” by harassing debtors into direct payments.

While the automatic stay shouldn’t be the sole reason you file for bankruptcy, it is a nice benefit that many filers appreciate. There are some cases in which the automatic stay may be lifted before the end of the case. Discuss this with your attorney if it’s something that you’re concerned about. It’s best to know the possibilities for every aspect of bankruptcy so you can plan accordingly.