If you have considered or are in the process of filing for bankruptcy, you may have heard about automatic stays. An automatic stay is one of the greatest benefits of filing for bankruptcy, and it can serve as the main reason many consumers choose to file for bankruptcy.
So what is an automatic stay? Here, we breakdown what an automatic stay is, and how an automatic stay can help you in bankruptcy.
What is an automatic stay?
An automatic stay is a official court document that gets sent to all of your creditors notifying them of your bankruptcy and legally prohibiting your creditors from taking certain actions. An automatic stay is created the moment your bankruptcy case is filed by you or your attorney in the courts,regardless of whether it is Chapter 7 or Chapter 13 bankruptcy.
As stated in section 362 of United States Bankruptcy code, an automatic stay prevents:
- The enforcement, against the debtor, or against property of the estate, of judgement obtained before the commencement of the case under this title
- Any act to create, perfect, or enforce any lien against any property of the estate
- Any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the state
If your wages are currently being garnished by a creditor, being foreclosed, or your bank account is prone to seizure, an automatic stay is what you need in order to protect your assets and cease these collection efforts.
Automatic Stay in Bankruptcy
An automatic stay is one of the most important rights granted to consumers under the United States Bankruptcy Laws. The automatic stay essentially notifies your creditors and lenders that your bankruptcy case has been filed and that all their collection efforts must cease immediately.
What if a creditor violates an automatic stay?
Your attorney will prepare the automatic stay for your creditors, which will often be sent by regular mail, email, and fax. If a creditor receives the automatic stay notification and continues to collect on your accounts, they may be held in contempt of court and can be sanctioned fully by the Bankruptcy Courts.
A creditor does have the legal right in certain situations to bring up a motion in bankruptcy court that asks to modify the automatic stay and remove bankruptcy protections from certain assets or accounts. This often occurs in Chapter 13 bankruptcy cases where the debtor falls behind on their repayment plan.
In a case of non-payment after Chapter 13 reorganization, it is possible that a trustee will file a motion to revoke the automatic stay and allow the lender to collect in court. In order to avoid problems with your automatic stay, it is suggested that you work with an attorney specializing in bankruptcy.
An automatic stay grants consumers the protection they need from creditors and lenders. The first step in filing your Chapter 7 or Chapter 13 bankruptcy case is to find an experienced attorney in your area. If you need to talk to a FREE attorney about filing for bankruptcy, CrediReady can help.
Our team of bankruptcy experts can connect you with trusted bankruptcy lawyers in your area for free. To get started, fill out our no-obligation consultation form to schedule your free call with an attorney in your area.