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What is Significant about the Automatic Stay in Bankruptcy?

Posted By Allmand Law Firm, PLLC || 14-Aug-2013

The automatic stay is one of the reasons why bankruptcy can be a powerful tool in helping you regain control of your finances. It is often seen as a stop sign to creditors or anyone looking to proceed with legal action against you. Whether you are behind on paying your bills or feel repossession is imminent, the automatic stay may help give you more time to sort out a solution.

The automatic stay halts legal proceeding such as lawsuits, repossessions, wage garnishments, and in many cases foreclosure. This can provide additional time for debtors to sort out their issues related to their debt. The protection of the stay goes into effect immediately when bankruptcy is filed. Creditors who try to collect from you while the stay is in place could face legal punishment from federal court.

The stay is designed to provide protect for your assets while your case proceeds. Creditors should not try to collect from you during this period. Meaning, phone calls, letters, and wage garnishment activity should cease. Depending on which chapter you file, you get a better idea of how long the stay protection will last.

In Chapter 7 bankruptcy it may last for a few months or until your case is completed. In Chapter 13 bankruptcy it could last anywhere from 3 to 5 years depending on the length of your repayment plan. Contact your bankruptcy attorney if creditors are continuing to contact you after you have filed your petition. The stay may not offer protection for prior debts such as child or spousal support.

Categories: Bankruptcy
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