Apart from actually receiving a discharge of debts, an Automatic Stay is probably the most important feature of filing for bankruptcy.
When you file for Chapter 7 or Chapter 13 bankruptcy, an automatic stay immediately goes into effect and prohibits most creditors from continuing with collection activities. This can provide welcome relief to debtors as well as an opportunity to regroup during bankruptcy. Because of this the automatic stay may provide a powerful reason to file for bankruptcy.
It’s important you educate yourself about what’s impacted by automatic stays before filing. While some things can be prevented, an automatic stay might not be able to prevent other important issues you are facing. Below you will find a quick list of things that can and cannot be prevented, but you should work with a lawyer to fully understand the ins and outs of each.
Automatic Stay Can Prevent:
- Utility disconnections
- Collection of overpayments of public benefits
- Multiple wage garnishments
Automatic Stay Cannot Prevent:
- Certain tax proceedings
- Support actions
- Criminal proceedings
- Loans from a pension
- Multiple filings
Creditors Can Still Get Around Automatic Stays
A creditor can usually get around the automatic stay by asking a bankruptcy court to remove, or “lift” the stay, if it is not serving its intended purpose. Here’s an example: you file for bankruptcy the day before your house is to be sold in foreclosure. You have no equity in the house and you can’t pay your mortgage. You have no way of keeping the property. The creditor seeking the foreclosing creditor can go to court after you file for bankruptcy and ask for permission to proceed with the foreclosure. That permission will most likely be granted.