The automatic stay is one of the most beneficial features of bankruptcy. This protection provides temporary reprieve from collection activities, while letting the filer regain their financial footing. While the automatic stay does not eliminate debt, it suspends efforts to collect on debts while the bankruptcy case is open. Anyone struggling with debt knows the emotional toll it can take. The incessant calls, collection letters, and sleepless nights.
Both a Chapter 7 and Chapter 13 bankruptcy give the filer the benefit of the automatic stay, which puts an immediate halt to any collection proceedings on debts owed, including foreclosure proceedings.
When does the Automatic Stay go into Effect?
The court will send out a written notice of the bankruptcy filing to all of the creditors listed, within 24 to 48 hours of you filing your petition. Once the automatic stay is in effect, creditors will be prohibited from initiating or continuing collection actions against you. If a creditor violates the stay by continuing to contact you, they are in contempt of court and can face serious fines and legal fees.
Examples of these violations can include: repossession of your vehicle during bankruptcy, or foreclosure on your home while the automatic stay is in effect. Even something as simple as the creditor mistakenly sending a collection letter can result in serious consequences.
Bankruptcy filers can maximize the effectiveness of the automatic stay by doing the following:
Maintain Insurance Coverage: It is important to continue making payments on your insurance premiums for your home and car while your bankruptcy case is active. Otherwise, you could be at risk of repossession and foreclosure.
Timing is Everything: Filing bankruptcy at the right time can boost the power of the automatic stay. For example, if a creditor is planning on filing a lawsuit against you, you can file your petition prior to the hearing to stop the proceeding- even up to the last minute.
Exercise your legal rights: If a creditor violates the automatic stay, you must act quickly. Consult your bankruptcy lawyer immediately, who may need to file a motion or complaint with the court.
If you have questions on this topic or are struggling with debt, call our law firm to schedule a free consultation.