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Automatic stays in a Chapter 7 bankruptcy

On Behalf of | May 30, 2024 | Chapter 7 Bankruptcy

Filing for bankruptcy often has a negative connotation, because it seems like a last resort after hitting rock bottom. Contrary to popular belief, bankruptcy may be a tool towards better financial standing.

When you file for bankruptcy, you can reorganize your debts. Filing for a Chapter 7 bankruptcy helps you achieve this through its automatic stay, which places a hold on most of your debts. The grace period may provide you with some much-needed breathing room before your meeting with creditors.

What is an automatic stay?

An automatic stay refers to an injunction that occurs as soon as you file for Chapter 7, 11, or 13 bankruptcy. It essentially protects you against most bill collectors. As soon as it is in place, creditors and collection agencies should stop collection activities at once.

How long does an automatic stay last?

Per the United States Courts, a Chapter 7 petition for bankruptcy stops collection against you or your property. Unlike a court order, this is not a judicial action, rather, it is a function of bankruptcy law.

The purpose of the stay is to buy you time to get your finances in order while a bankruptcy clerk informs all the creditors you list of your situation. The stay typically lasts the period it takes you and your creditors to meet and discuss the situation.

How does an automatic stay protect you?

There are actions that creditors are not allowed to take under an automatic stay. They may no longer have the authority to contact you by phone or written correspondence. They cannot file suit to collect the debt or maintain a collection lawsuit. They also should not garnish your wages or file a lien.

Petitioning for and undergoing bankruptcy may come with complications. Seeking the services of an experienced attorney may help you understand its benefits and how they can work to your favor.

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