On top of worrying about your debt that is not going down in any meaningful way anytime soon, the constant phone calls, letter, and text messages from your creditors do not help you get in a healthy mindset to deal with your financial issues. Want them to stop? You should consider filing for bankruptcy so you receive what is referred to as the “automatic stay.” This blog will take a look at this provision and how it can benefit a bankruptcy filer.
What Does the Automatic Stay Accomplish?
Once you officially file for bankruptcy—no matter which Chapter you file for—you are entitled to have your creditors stop trying to collect on their debts. Additionally, it can stop your creditors from:
- Initiating or continuing court proceedings related to your outstanding debt
- Foreclosing on your home
- Evicting you from your residence (in most cases)
- Perfecting (filing) or enforcing a lien on your property
- Repossessing collateral for secured debts
The length of the automatic stay in your case depends on several factors. The stay as it relates to your property secured by a lien lasts 30 days, unless you file a statement of intention wherein you state what you intend to do with the property. If you intend to surrender or to reaffirm and pay for the property, you then have 30 days after the date first set for the section 341 meeting of creditors to perform your intention. All collection attempts related to you as a debtor must stop until the bankruptcy results in a discharge of debts. This will last a few months in Chapter 7 cases or 3-5 years in Chapter 13 cases. When your case is discharged you will then be protected by a permanent discharge injunction.
A creditor may also request to be exempt from the automatic stay and continue to collect on debt or repossess collateral in rare circumstances. For example, if you are not paying the loan on a secured property or if you have no equity in a particular asset and it is not necessary for an effective reorganization, the court may grant relief for the creditor.
Also, the automatic stay does not apply to every type of debt. Generally, these are debts that are also not eligible for discharge in a bankruptcy. They include:
- Child support payments
- Alimony payments
- Debts incurred after filing for bankruptcy
What if Your Creditors Don’t Stop Trying to Collect Debt?
If your creditors do not abide by the terms of the automatic stay, then you may request that the court enter sanctions against the offending party.
Conclusion
While bankruptcy is often not quite as damaging as you might have heard, it is still a significant action to take. It is best filed for after speaking with a knowledgeable attorney and other licensed experts. If you are considering filing for bankruptcy, give Velazquez Consumer Law, LLC a call at 630-576-9030 to discuss your options over a complimentary case evaluation.
Velazquez Consumer Law
