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How bankruptcy’s automatic stay can protect you

On Behalf of | May 8, 2024 | Chapter 7 Bankruptcy

Debt collection calls, threatening letters and the fear of losing your car are all too familiar for many struggling financially. But what if there was a temporary pause button on collection activities? This is exactly what the automatic stay offers when you file for bankruptcy.

The automatic stay is a U.S. bankruptcy law that immediately stops most debt collection efforts from creditors the moment your bankruptcy petition is filed. It’s meant to offer you much-needed breathing room to figure out how to manage your debt. 

Foreclosure and repossession 

Facing foreclosure on your home or repossession of your car can be devastating. The automatic stay can prohibit creditors from moving forward with these actions. This temporary halt can allow you to explore options like catching up on missed payments through a repayment plan or potentially selling the asset yourself to pay off the debt.

Lawsuits and wage garnishments 

Creditor lawsuits seeking repayment and court-ordered wage garnishments are also put on hold thanks to the automatic stay. This means you won’t face the stress of a looming lawsuit or have your wages reduced further. However, it’s crucial to remember that the stay only applies to existing debts, not new ones you’ve incurred after filing for bankruptcy.

Collection calls and harassment 

The cascade of phone calls and intimidating letters from debt collectors can significantly affect your well-being. The automatic stay prohibits such collection activities, giving you a reprieve from the constant pressure. Keep in mind that creditors can still communicate with you about the bankruptcy case itself.

If you’re drowning in debt and are experiencing relentless collection actions, filing for bankruptcy can be a way to regain control of your finances. The automatic stay is an invaluable asset for those who choose to file for bankruptcy. However, it’s a significant decision, and seeking legal guidance can be essential to understand the process and explore all available options.