Financial hardships are a daily occurrence for many Americans. For some, the realization that their financial situation isn’t likely to get better can be disheartening. When one of the factors that’s leading to the financial hardship is credit accounts and debts, they may decide to explore bankruptcy.
Bankruptcy is a legal tool for seeking a fresh financial start. One of the benefits of bankruptcy that many filers appreciate is the automatic stay. This is a powerful legal provision that kicks in as soon as the bankruptcy is filed. It immediately halts most collection efforts, including lawsuits, wage garnishments and creditor contact.
The automatic stay is important because it puts all creditors on the same level during the bankruptcy process. In nearly every bankruptcy, creditors have to discharge at least a portion of the debt. By issuing the automatic stay, the court is taking a necessary step to ensure that some creditors aren’t trying to circumvent the bankruptcy payment process in an effort to collect more than their fair share.
What does the automatic stay cover?
The automatic state isn’t all-encompassing. It can stop foreclosures, repossessions and legal actions like civil lawsuits that are related to debts. It can even temporarily halt utility shutoffs. However, it won’t stop what a person owes from child support obligations, some tax audits or criminal proceedings.
The automatic stay is only one factor to consider if you’re thinking about filing bankruptcy to take control of your debts. You have specific rights and responsibilities throughout the process, so it’s critical to work with someone who understands this and can help you as you go through the bankruptcy journey.