One of the main benefits of a bankruptcy filing is undoubtedly the automatic stay. This powerful legal action serves as a virtual "stop sign" for bill collectors, foreclosures, evictions, and utility shut offs. Once you have filed your bankruptcy petition with the federal court, you are immediately protected from several different types of collection activity, however, the automatic stay doesn't apply to every single debt you owe. To find out what the automatic stay can and cannot do, read on.
What the Automatic Stay Can Do
1. All unsecured debt collection activity will come to a stop. Unsecured debt normally encompasses credit card debt and personal loans. You will no longer be obligated to pay any unsecured debt once your bankruptcy petition is final, but in the meantime you won't be harassed by collection agencies and you will be able to use that minimum-payment money for other uses, like your mortgage or rent.
2. Halt eviction and foreclosure procedures, at least temporarily. Unfortunately, your home could still be surrendered later on if the value and equity exceed your exemption, but the automatic stay does give homeowners some breathing room to catch up on their mortgage payments or make other living arrangements. For renters, the availability of an automatic stay to stop eviction procedures depends on whether or not the landlord filed eviction papers before or after your bankruptcy filing.
3. If your electricity, water, gas and phone are being threatened with disconnections, you can put this action off for at least 20 days.
4. Bill collection activity can involve garnishment of wages, but an automatic stay will suspend those garnishment orders, immediately allowing you more take-home pay. It should be noted that the debt that led to the wage garnishment may not be one that can be discharged with bankruptcy and that wage garnishment caused by owing back child support is not affected by the stay.
What the Automatic Stay Cannot Do
1. If you owe the IRS money, you are not protected by the automatic stay. You must continue to pay as agreed on any installment plans and you must also pay any taxes owed when filing your return. The automatic stay does, however, prevent the attachment of property liens.
2. If you owe money for court costs, fees or other moneys to a court system, the automatic stay will not affect those obligations.
3. If you owe child support or alimony (spousal support) you must continue to pay as ordered.
The power of the automatic stay is undeniable, especially when you consider that it could keep a roof over your head and your utilities turned on. Contact a bankruptcy attorney, such as Dennis Lee Burman Attorney at Law, for more information about automatic stays and how a bankruptcy could the right financial move for you.