If bills and debt become overwhelming, bankruptcy can become your only action in order to regain control of your finances. Once you file bankruptcy, the court issues an order to every creditor called an automatic stay. This prevents collection actions and civil lawsuits from being filed against you until the bankruptcy is completed or that automatic stay is lifted.
It is the automatic stay that can make bankruptcy so compelling for some. It can protect you more than you think. If you have spiraling debt and risk losing everything, here is what the automatic stay of a bankruptcy filing can protect you against.
For example, the automatic stay is so powerful that it protects you against even debts that don’t go away in bankruptcy. For example, it stops garnishment for student loans.
What an Automatic Stay Prevents
- Evictions – One of the most common reasons to file bankruptcy is that your debt will soon see you homeless. If eviction is imminent, the automatic stay can help. Unfortunately, this is typically temporary, but can help you catch up on rent. If the landlord already has a judgment for eviction, the automatic stay will not be able to help. Furthermore, if the landlord is seeking eviction for property damage or illegal substance use, it cannot help with that either.
- Wage Garnishment – There are some cases, like garnishment for child support, that are not affected by an automatic stay. However, if other debt is causing your wages to be garnished, the automatic stay will stop this. It will allow you to return with a full paycheck and bankruptcy will work to having that debt discharged.
- Foreclosure – Similar to eviction, an automatic stay can buy you time if your home is in foreclosure. However, if you own a home, what happens next is dependent on what type of bankruptcy you file. A Chapter 7 temporarily stops foreclosure, but a Chapter 13 bankruptcy with a repayment plan will allow you to keep ownership. Regardless, the automatic stay will still buy you 2 months at the minimum.
- Utility Shut Off – While a single utility bill that is being threatened is never really cause to file bankruptcy, if it is just one of many financial worries, the automatic stay can stop it for at least 20 days.
What an Automatic Stay Cannot Prevent
- Child Support Collection – If you have been required by family court to pay child or spousal support, an automatic stay will not prevent this. You are still required to pay that amount.
- Criminal Punishments – Similar to support payments, if you have fines that were set as a punishment for a crime, you are required to pay them. The automatic stay and bankruptcy will have no effect on them.
- Taxes – The automatic stay can temporarily stop some tax issues such as properly seizure or liens. However, this is temporary and may not be discharged by bankruptcy. While the automatic stay is in place, many actions by the IRS will still proceed.
- 401(k) Loans – If you took a loan from your 401(k), an automatic stay will have no effect on repayment. This will come directly from your income, so while an automatic stay can stop some wage garnishment, it cannot stop that. This is actually a good thing, because you wouldn’t want the 401(k) loan repayment to stop after bankruptcy.
Contact Walker & Walker Law Offices, PLLC
If you find yourself overwhelmed by debt, then filing bankruptcy can be the answer. An automatic stay can help you keep your home and keep the lights on in it while bankruptcy can help you discharge the debt. If you want to begin the bankruptcy process and retake the reins to your out of control debt, contact us today.
The bankruptcy attorneys at the Walker & Walker Law Offices are ready to walk you through each step of what doesn’t need to be a complicated process.