What is the Automatic Stay?
Filing for bankruptcy may seem daunting. However, one of the most helpful tools for those filing bankruptcy is automatic stay. This United States bankruptcy law does not allow creditors or debt collectors to take legal action or file lawsuits against debtors once the bankruptcy process has begun.
This can be useful for those people at risk for eviction or foreclosure, at risk for losing utilities, welfare, or unemployment benefits. In short, automatic stay can benefit you in a time of economic and financial crisis.
Many people worry that if they file for bankruptcy, creditors will antagonize them to take assets or money they may have, regardless of whether or not it can affect their living conditions. This can be frightening, especially if you have a spouse or child who depends on you for financial security. For this reason, automatic stay is designed to help those in a time of need.
What an Automatic Stay Can Stop
Below is a list of ways the automatic stay law can help when filing for bankruptcy.
- It can stop utility disconnections.
If you are incapable of paying your utility bill, companies may threaten to disconnect necessary resources such as water, electricity, and gas. However, the automatic stay law can postpone these disconnections for at least of 20 days.
- It can stop or pause foreclosure.
Oftentimes, automatic stay can postpone proceedings if your home mortgage is at risk of foreclosure. If a person would like to keep their house during the bankruptcy process, that person should consider filing Chapter 13 Bankruptcy.
- It can stop the eviction process.
Automatic stay can stop property owners from evicting tenants in short amounts of time. However, property owners can find loopholes to evict you and your family earlier. While the automatic stay can postpone the eviction for a few days or a couple weeks, a person facing financial crisis should speak with an experienced bankruptcy attorney immediately.
- It can stop the collection of public benefits overpayments.
In most cases, if you received over payments due to your public benefits, an agency is entitled to collect these overpayments from your checks. The automatic stay law may be able to prevent these collections to help you and your family.
- It can stop wage garnishments.
When filing for bankruptcy, the automatic stay law will not allow any collection agencies to take any part of your salary. This may exclude wages used to satisfy court judgments.
What an Automatic Stay Cannot Stop
While the automatic stay can help in many financial situations, there are limitations to what the order can do.
The automatic stay cannot prevent certain collections or actions, such as:
- Some tax proceedings, such as an IRS tax audit or demand for owed taxes
- Child support or alimony payments
- Criminal proceedings (only the debts from your case can be stopped)
- Divorce proceedings
If you have financial burdens from the above, be sure to let your attorney know so you are able to plan accordingly to sufficiently handle these debts.
How Long Does the Automatic Stay Last?
The automatic stay remains in effect for the duration of the bankruptcy case until your discharge, or until the judge lifts it at the request of a creditor. Once your bankruptcy case is completed, creditors can resume collecting debts from you, assuming you still have outstanding debts that cannot be discharged.
Wadhwani & Shanfeld Can Help
Bankruptcy can be a great resource. In fact, bankruptcy can be the best option to help you get on your feet. If you are facing a serious financial crisis, it is important to speak with a skilled bankruptcy lawyer to ensure your situation is examined detail by detail. With sources like the automatic stay, bankruptcy can be an accommodating way to maintain a comfortable situation for your family.
If you have encountered a difficult financial situation and are considering bankruptcy, call our Southern California bankruptcy lawyers at Wadhwani & Shanfeld. We can explore your case and discuss any options that may help you.