In legal terms, a "stay" means to stop an action. Stopping action is exactly what most filers want when they file for chapter 7 bankruptcy. They want to stop irritating debt collection actions, court filings against them, and foreclosure and repossession actions. The automatic stay stops all those actions and more. Read on and find out more about what this bankruptcy code protection does for filers along with its limitations.
Stay Debt Collection Activities – Even those that follow the contact laws are annoying and persistent. Debt collectors can be relentless. As soon as you file in federal court, things will change. They cannot send you a statement or any other correspondence, they cannot call you, text you, email you, or use anything else. If they call, give them your federal case number and the name and phone number of your bankruptcy lawyer. There are a few notable exceptions and those involve debts that cannot be discharged by bankruptcy. That includes some tax debts, student loan debts, child support, and legal fees (including court costs).
Stay Wage Garnishment – If you have already been sued for past-due bills and the creditor won a judgment, your wages can be garnished. That means a certain percentage of your paycheck is removed and sent to pay a debt. This lessens your take-home pay and negatively impacts your budget. Unless the wage garnishment is connected to past-due child support, spousal support, or certain taxes, the wage garnishment will come to an end with your chapter 7 filing.
Stay Foreclosures and Repossessions – This area of automatic stay rules are a bit more complex and represents a temporary solution at best. All foreclosure and repossession activity must come to an end with a filing but can resume after a certain time period. You have to work things out with the lenders and catch up on your bills or you may end up losing your home or vehicle. You can expect to have more money to use for those items when you no longer have to pay credit card, medical, and personal loan debts, though.
Stay Utility Disconnections – Your water, phone, electricity, gas, and other utilities are commonly behind when you cannot pay your bills. A bankruptcy filing will keep your utilities on for about 20 days after you file but you must pay what is owed or make arrangements to keep things running after that.
Clearly, the automatic stay is a powerful protection that consumers can take advantage of when things get financially fraught. To find out more about this legal concept and more, speak to a bankruptcy lawyer.