If you are ever unable to pay your creditors, they will probably start calling and writing to demand payment. While bankruptcy is primarily used as a tool to help people get rid of their debts, it includes a provision to prevent further creditor collection actions from being taken against them. Learn more about this useful tool below.
What is the Automatic Stay?
The automatic stay is an automatic injunction! The “stay” begins when a bankruptcy case is filed and prevents all collection activities against debtors on their property to collect pre-petition (or pre-filing) debts owed to their creditors. The automatic stay stops foreclosure actions, repossessions, creditor harassment (including telephone calls), lawsuits over unpaid credit card debt, etc.
However, this order does not stop creditors from initiating lawsuits to collect money that you owe after the bankruptcy case is filed. The automatic stay only prohibits collection activities against debtors or their property in an attempt to collect debts until the bankruptcy proceedings are over.
If a creditor tries to enforce its security interest by repossessing your collateral (car, home, business equipment, etc.) when you file for bankruptcy relief, your automatic stay will stop the repossession action. If a creditor tries to foreclose on your home or seize other personal property when you file for bankruptcy relief, your automatic stay will stop the foreclosure or repossession action as well.
Creditors can still sue you for these debts and attempt to recover a deficiency judgment after the bankruptcy case is filed. However, many creditors are reluctant to sue you for a deficiency judgment after your bankruptcy case has been filed because they know the difficultly of collecting from bankrupt debtors. A deficiency would be discharged the same as a credit card or other unsecured debt.
Time to Consult With An Attorney
If you are consistently falling behind on your debts, having your creditors constantly breathing down your neck can only make the situation more stressful. If you are looking for a way to get creditors off your back and get rid of your debt, we may have the solution for you.