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How the automatic stay can help with creditors

| May 18, 2021 | Bankruptcy

Those struggling with overwhelming debt likely need a break from the stress and strain of creditors. Filing for bankruptcy can help struggling consumers in a variety of ways, including through the automatic stay that can help keep creditors at bay during the process.

Effects of the automatic stay

The automatic stay is one way to stop creditors during the bankruptcy process. The automatic stay goes into effect once the filing party has filed for bankruptcy protection and remains in effect until the bankruptcy process is complete or an action to lift the stay is successful. The automatic stay can potentially help with:

  • Wage garnishment: the automatic stay can stop all wage garnishments against the filing party.
  • Utility disconnection: the automatic stay can help prevent the filing parties utilities, including electric, phone, water and gas services, from being disconnected for at least a 20-day period.
  • Foreclosure proceedings: the automatic stay can stop foreclosure proceedings against the filing party and personal bankruptcy protections may be able to provide longer term relief.
  • Evictions: in some circumstances the automatic stay can protect the filing party from eviction. Because eviction protections can vary, the filing party should be familiar with how the automatic stay may be able to protect them from eviction where they are at.
  • Government efforts to collect overpayment of public benefits: the automatic stay can prevent the government from seeking to recover any overpayment of public benefits while it is in place.

Making use of the automatic stay

The automatic stay is a useful protection against creditors because it prevents them from pursuing creditor collection actions during the bankruptcy process. All types of bankruptcy protection include automatic stay protections once the filing party has filed or bankruptcy. It, and others, are important bankruptcy protections to be familiar with.