When the bills are not getting paid and the collection agency calls outnumber the telemarketers, it might be time to consider bankruptcy. While most people associate a bankruptcy filing with unloading the burden of too much debt, there is another benefit that is not as well known but takes effect right away. Read on to learn more about the immediate relief of the chapter 7 bankruptcy automatic stay.
What is the Automatic Stay?
In legal terms, a stay is an order to stop an action. The automatic stay is "automatically" part of the sheath of bankruptcy papers that gets filed in federal court. As soon as the case hits the docket, the stay comes into effect.
When creditors file suit against you for unpaid bills, a judgment could mean wage garnishment. This act allows creditors to take a certain amount of money directly from your pay, leaving you with only a partial paycheck. Once you file, you will once again begin receiving your full paycheck. It should be noted that two types of debt will remain unaffected by the automatic stay. If you owe back child support or the IRS, the wage garnishment will remain in place until you bring your account up to date.
There are few things more annoying than the constant phone calls from collection agencies. You can expect some real peace and quiet after you file for bankruptcy, however. The automatic stay means that no one you owe money to can contact you for any reason whatsoever. If they do, provide them with the contact information for your bankruptcy attorney and your federal case number and that will probably be the last time you hear from them.
You may be on the verge of having your electricity, phone, gas or water shut off due to unpaid bills. The automatic stay, however, provides debtors with some temporary relief. Though you cannot include utility bills in your bankruptcy, the automatic stay will give you some time to get those bills caught up. You have about 20 days to pay your bills after a filing to get caught up on your utility payments.
As with utility cut-offs, you can temporarily halt foreclosure actions. Your home loan, however, is a different kind of debt and if you don't pay your mortgage the bank can take action against you. The automatic stay can provide a few months of leeway while you make payment arrangements. Ultimately, the potential for losing your home rests in whether or not you can make things right with your lender.
Speak to a bankruptcy lawyer to learn more.