How a Bankruptcy Automatic Stay Works for You

When a debtor files for bankruptcy, the first form of relief they receive is an automatic stay. An automatic stay stops creditors in their tracks so that the debtor’s assets, including property and wages can be protected from seizure while the bankruptcy case proceeds.

Bankruptcy’s automatic stay prohibits creditors from calling a debtor’s house or work. The bankruptcy automatic stay also prohibits creditors and their attorney’s from sending the debtor letters; but most importantly, the automatic stay stops all lawsuits and wage garnishments against the debtor from proceeding. Even if a creditor has already won a judgment against a debtor, the creditor can no longer collect on the judgment after the bankruptcy automatic stay has been put in place. The creditor must also stop any wage garnishment or bank account seizure already in place against the debtor.

If the creditor fails to obey the bankruptcy automatic stay they may be fined or penalized by the bankruptcy court. Penalties could include money damages and attorney’s fees awarded to the debtor.

By | 2017-12-13T02:13:52+00:00 August 11th, 2009|Bankruptcy, Credit Card Negotiation, Debt and Tax Relief|Comments Off on How a Bankruptcy Automatic Stay Works for You