Bankruptcy's Side Job: The Automatic Stay

Almost everyone knows that a chapter 7 bankruptcy filing can eliminate virtually all of a person's debt with a single motion, but few know about the bonus of the automatic stay. This legal maneuver is "automatic" in two ways: it is automatically included in the rest of your bankruptcy paperwork, and it works automatically to stop certain creditor actions. Read on to more about the benefits of this financial helper that is built right into your chapter 7 filing.

Are you in danger of losing your home?

Fear of losing a roof over their head can be one of the prime reasons people consider a bankruptcy filing. When borrowers fail to make the mortgage payments as agreed, the lender has the right to swoop in and reclaim the home from them. Foreclosure is a process, and it can take a few months to become final, but a bankruptcy filing uses the automatic stay to assure that you can stay in your home a few more months. This much-needed breather can give homeowners time to make arrangements to catch up or move out.

If you are a renter and behind on your payments, you may now be in danger of being evicted. The automatic stay may be able to help you stay in your home a few more months if your timing is right. As long as the landlord hasn't already filed an eviction action against you, you still have time in your home.

Are bill collectors hounding you?

Collection activity can be incredibly aggressive and even when creditors comply with the rules about when and where to contact you the strain can be considerable. Once you file your chapter 7 paperwork with the court, all contact with collection agencies, credit card issuers and all creditors must cease. Any calls that come in after you file can be stopped by providing the caller with your case number and the name of your bankruptcy lawyer.

Is your paycheck being eaten away?

When you don't honor your debts creditors can go to court and have your wages garnished. As you might be experiencing, this reduction in pay doesn't help your ability to stay afloat and pay your other bills. The stay will cause all wage garnishment to cease, with two exceptions:

1. Child support

2. Federal taxes

When it comes to this form of debt relief there is one important point to keep in mind: the debts mentioned above may not be debts that can be forgiven with a bankruptcy filing. For example, you will eventually lose your home if you don't get your mortgage caught up. The stay is meant to provide temporary relief only. Speak to a bankruptcy company like The Gil Law Firm to learn more.